Speculation that the Bank of Japan is preparing to raise interest rates drove the yen sharply higher on Thursday, lifting the currency more than 1.7% against the dollar to 155.85, its strongest level in a month. The move followed a 0.9% gain the previous session.
The two-day rally reversed weeks of yen weakness that had left the currency near multi-decade lows against the dollar.
U.S. Treasury Secretary Scott Bessent added to the momentum. He told CNBC on Monday he believed Japanese officials would act to produce a stronger yen, comments that reinforced expectations of intervention or a rate increase.
The remarks echoed earlier pressure from Washington, where Bessent has repeatedly pushed Tokyo to lift borrowing costs and narrow the interest-rate gap that has weighed on the currency. That gap has been the main driver of yen weakness through the year.
The Bank of Japan has held its benchmark rate at low levels while other major central banks tightened, leaving the yen exposed to carry-trade selling. A higher policy rate would reduce that pressure by raising the return on yen-denominated assets.
Traders are now weighing whether the recent strength reflects direct official action or positioning ahead of a policy meeting. Desks noted the speed of the two-session move, which pointed to a rapid unwinding of short-yen positions.
Global markets stayed jittery through the session as the currency swings rippled across risk assets. The dollar’s retreat against the yen came as investors reassessed the timing of monetary shifts in Tokyo.
Attention now turns to the next Bank of Japan policy meeting, where any decision on interest rates will set the near-term direction for the pair.