Yen Surges Amid Pre-BOJ Speculation, Hits Multi-Month Highs

The yen reached its strongest level against the dollar in over two months, driven by unwinding carry trades and risk aversion in anticipation of the Bank of Japan's meeting next week. Analysts expect the central bank to discuss a rate hike and a significant reduction in bond purchases.

The yen reached its strongest level against the dollar in over two months on Thursday, hitting multi-month highs against other major currencies ahead of the Bank of Japan's (BOJ) meeting next week. Analysts attribute this surge to the unwinding of yen carry trades and a shift in market sentiment.

Sources told Reuters that the BOJ is expected to debate a potential interest rate hike and to unveil plans to roughly halve bond purchases in the coming years, signaling its intention to gradually unwind monetary stimulus. The yen surged over 1% against the dollar, peaking at 152.23, a level not seen since May.

The euro and sterling fell by over 1%, reaching their weakest levels against the yen since May. "Speculative short yen positions were unwound, triggering stops and supporting the yen's rise," said Khoon Goh, head of Asia research at ANZ. Wall Street's downturn and risk aversion also bolstered the yen as a safe haven.

(With inputs from agencies.)