Yen set for 2.5% weekly gain as BOJ hike bets rise

Japanese currency strengthens as markets reassess BOJ policy outlook; dollar index holds at 99.01 ahead of US payrolls data, while traders cut odds of a September Fed rate hike to 50% HONG KONG: The Japanese yen was on track for its strongest weekly performance in more than a month on Friday as traders increased bets on a Bank of Japan (BOJ) interest rate hike, while the US dollar remained broadly flat ahead of key employment data. The yen strengthened to as much as 155.25 per dollar in morning trading, approaching the 155.20 level reached last month following intervention in the currency market. It later eased to around 155.71 per dollar. The Japanese currency was heading for a 2.5% weekly gain, its strongest performance since late July, when intervention was undertaken to arrest a sharp decline in the yen. Expectations of tighter Japanese monetary policy have supported the currency ahead of the BOJ's September 17-18 meeting, with markets reassessing the likelihood of further policy normalisation. Japan's top currency diplomat Atsushi Mimura also said authorities remained alert to exchange-rate movements and were in regular contact with US officials, keeping the possibility of further intervention in focus. Meanwhile, the dollar index, which tracks the US currency against a basket of major currencies, was little changed at 99.01 and was heading for a weekly decline of around 0.7%. The euro was broadly flat at $1.1625, while sterling traded at $1.3527. Investors are awaiting US non-farm payrolls data later on Friday and inflation figures next week for indications of the Federal Reserve's policy direction ahead of its September 15-16 meeting. Federal Reserve Governor Christopher Waller said on Thursday that he was leaning towards keeping interest rates unchanged this month if upcoming inflation data showed that price pressures continued to moderate. Following the comments, traders reduced the implied probability of a September Fed rate increase to around 50%. Currency markets were also monitoring geopolitical tensions in the Gulf and their potential inflationary impact, with Brent crude remaining above $95 a barrel following US strikes on Iran this week. Elsewhere, the New Zealand dollar gained 0.2% to $0.5892 after the country's central bank raised its policy rate by 25 basis points to 2.75% on Wednesday and signalled further tightening. The Australian dollar edged 0.1% higher to $0.7206, while bitcoin declined 0.3% to $80,995.51.