FOREX-Yen's rally to seven-month high weighs on dollar ahead of US CPI

The dollar index =USD, which measures the greenback against a basket of currencies, was a subdued at **98.84** amid yen strength. That left the euro EUR= and sterling GBP=D3 both largely flat, last at **$1.1623** and **$1.3538**, respectively. Market focus now shifts to U.S. inflation readings USCPFY=ECI this week, the last set of key data releases ahead of the FOMC meeting on September 15 to 16, with traders now pricing a roughly **60%** chance of a Federal Reserve rate hike this month 0#USDIRPR following Friday's stronger-than-expected nonfarm payrolls report. Federal Reserve Governor Christopher Waller said last week that inflation dynamics were key to his policy outlook and that he was leaning toward keeping rates steady if price pressures continued to moderate, but would support a hike if inflation failed to cool. Investors were also watching geopolitical tensions in the Gulf and their implications for inflation after Iran threatened on Monday to retaliate against any new U.S. attacks on its assets, warning that energy infrastructure across the Gulf including U.S. oil and gas interests was vulnerable. Oil prices hovered near a six-week high, with Brent crude futures LCOc1 firmly above **$97 a barrel**. The New Zealand dollar NZD=D3 was **0.3%** weaker at **$0.5860**, while the Australian dollar AUD=D3 was flat near a near multi-month highs at **$0.7215** as investors continued to wager on more rate hikes at home. Elsewhere, China's yuan CNY=CFXS was flat near a 3-1/2-year high at **6.71 per dollar**, after data showed the country's exports expanded faster in August. The Japanese yen climbed to a seven-month high against the U.S. dollar on Tuesday, as traders continued to unwind short positions amid growing bets of a Bank of Japan interest-rate hike, putting pressure on the dollar ahead of CPI data this week. The yen JPY= strengthened to as much as **152.89** per dollar in Asia, surpassing levels reached during Japan's July intervention and hitting its strongest since February. It was last at **153.48**. The gains added to the yen's **1.2%** jump during a thin session on Monday amid a U.S. holiday, with the Japanese currency now having firmed roughly **4.5%** from around **160 yen per dollar** early last week. Traders and analysts said a slew of factors are now driving a sea change for the currency that is turning away bears. These include bets on a faster pace of Bank of Japan tightening, the potential for Japanese investors to repatriate their funds, the unwinding of carry trades and U.S. political pressure. "When the yen started to move stronger, I think it triggered a lot of stop losses... especially when they started to break some of those key levels," said Khoon Goh, head of Asia research at ANZ. "The thing about this kind of momentum moves is it can be self-reinforcing, and it really depends on whether there's still a lot of short yen positions that are still to be stopped out," he said, adding the next key level to watch will be **150**.

FOREX-Yen's rally to seven-month high weighs on dollar ahead of US CPI

Dollar subdued as markets await US inflation data

Oil, Antipodean currencies and yuan also in focus

Yen climbs to seven-month high against the dollar

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