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.
Japanese Finance Minister Satsuki Katayama said on Tuesday that Tokyo and Washington remain aligned in their approach to currency markets and will continue close communication to ensure orderly foreign exchange movements.
TLT•
