Japanese Yen hits six-and-a-half-month high on hawkish BoJ bets

The Japanese Yen reached a six-and-a-half month high on Monday as investors bet on hawkish policies from the Bank of Japan (BoJ). The Yen strengthened against the US Dollar, which dropped in value, reaching its lowest level since February. This rally was driven by expectations of a 25 basis point interest rate hike at the BoJ's September meeting and speculation of faster policy normalisation.

Additionally, repatriation of capital and unwinding of Yen-funded carry trades contributed to the Yen's ascent. However, analysts caution that further gains may depend on whether expectations shift towards a more aggressive policy path and whether repatriation rumors materialize into actual flows. The US Dollar, meanwhile, faces challenges due to rising Federal Reserve rate hike expectations.