Key Takeaways
- The Japanese yen reached a seven-month high against the US dollar.
- Traders are unwinding short positions amid bets of a Bank of Japan interest-rate hike.
- Market focus shifts to US inflation data this week.
The Japanese yen has climbed to a seven-month high against the US dollar, reaching 153.53 per dollar in morning trading, surpassing levels seen during Japan’s July intervention and hitting its strongest level since February.
The yen’s strength comes as traders unwind short positions, driven by bets on a faster pace of Bank of Japan tightening and potential repatriation of Japanese investors' funds.
Market analysts, including Tony Sycamore from IG, noted that the yen’s rise could open the way for a test of the next layer of support, adding that the currency has firmed nearly 4% from around 160 yen per dollar early last week.
The dollar index, which measures the greenback against a basket of currencies, was weaker at 98.83 amid yen strength, leaving the euro and sterling both 0.06% stronger at $1.1628 and $1.3549, respectively.
Traders are now focusing on US inflation data this week, with the last set of key data releases ahead of the FOMC meeting on September 15 to 16. A Federal Reserve rate hike this month is now priced at around 60% following Friday’s stronger-than-expected nonfarm payrolls report.
Geopolitical tensions in the Gulf are also influencing market sentiment, with Iran threatening retaliation against any new US attacks on its assets, warning that energy infrastructure across the Gulf, including US oil and gas interests, is vulnerable.
Oil prices remained near a six-week high, with Brent crude futures firmly above $97 a barrel. The New Zealand dollar was 0.1% stronger at $0.5882, while the Australian dollar was flat at $0.7219.
China’s offshore yuan was flat near a 3-1/2-year high at 6.708 per dollar ahead of trade data due later in the day, which is expected to show the country’s exports likely grew at a faster pace in August.
