Yen extends rally to new seven-month high; dollar subdued ahead of CPI

Business Recorder reported that the Japanese yen rose to as much as 153.53 per dollar on Tuesday, its strongest level since February. The rise follows a 1.2% gain in a thin Monday session that coincided with a US holiday, leaving the currency nearly 4% firmer than early last week.

Traders and analysts pointed to several drivers, including bets on faster Bank of Japan tightening, possible repatriation of Japanese investors' funds, the unwinding of carry trades and US political pressure. Tony Sycamore of IG said the decline looked more like a sharp unwinding of yen short positions after key support levels gave way, and could lead to a retest of the following support area. Meanwhile, the dollar index, a gauge of the greenback versus a currency basket, slipped to 98.83, while the euro and sterling each rose 0.06%, to $1.1628 and $1.3549.

Market attention now turns to US inflation figures due this week, ahead of the FOMC meeting on September 15 to 16. Traders put the odds of a Federal Reserve rate increase this month at about 60%, after a stronger-than-expected nonfarm payrolls report. Investors are also weighing Iran's threat to hit back at any new US strikes on its assets, a warning that Gulf energy infrastructure could be exposed, while Brent crude held above $97 a barrel near a six-week high.