The Japanese yen extended its gains on Tuesday and moved closer to its strongest level against the U.S. dollar this year. Investors are increasingly betting that the Bank of Japan will raise interest rates as inflation continues to rise.
The yen has gained more than 4% against the dollar over the past week. Monday’s move was helped by thin trading because U.S. markets were closed for a holiday.
The currency has been recovering after a sharp fall earlier this year. A joint intervention by Japanese and U.S. authorities at the end of July pushed the yen higher from a nearly 164-per-dollar level, its weakest point in about four decades. The yen later lost some of those gains before buyers returned last week.
On Tuesday, the yen briefly reached 152.89 per dollar. That put it close to the 152.10 level recorded in February, which remains its strongest point of 2026.
Markets widely expect the Bank of Japan to raise rates. Some investors are even betting that the central bank could deliver two increases in a row.
However, U.S. inflation data due Friday could also play a major role. The figures may influence the Federal Reserve’s next decision on interest rates.
Strong U.S. jobs data released last week has increased expectations for a Fed rate hike. The CME Group’s FedWatch tool was showing a probability of more than 60% for an increase.
Higher oil prices are making the situation more difficult for the Federal Reserve. Oil has moved closer to $100 a barrel following renewed tensions in the Middle East. U.S. diesel prices also reached a record high on Monday, according to AAA.
Stephen Innes of Quintex Intel said investors are dealing with several major risks at the same time, including a possible Fed rate hike, persistent inflation, expensive oil, further rate increases in Japan, money flowing back into Japan and renewed tariff threats against Canada.
Innes said a weaker-than-expected inflation reading would give the Fed more room to wait before raising rates. But a hotter reading could create a much bigger problem because oil prices are already moving higher.
Expectations for higher U.S. interest rates also put some pressure on stock markets. Technology companies, however, continued to attract strong buying.
South Korean chipmakers SK hynix and Samsung were among the biggest gainers, rising about 4% and 2.5%. Japanese companies Kioxia, SoftBank and Advantest also moved higher, while Taiwan’s TSMC gained as well.
The strong performance from technology stocks helped South Korea’s Kospi rise around 2%.
Japan’s Nikkei also moved higher, but gains were limited because the stronger yen hurts exporters by making their products more expensive overseas.
Markets in Taipei, Shanghai, Manila and Jakarta also posted gains. Hong Kong, Sydney, Singapore and Wellington moved lower.
Investors are now turning their attention to Oracle’s earnings on Thursday. The results will be closely watched for signs about the strength of the artificial intelligence boom and whether demand for AI-related technology remains strong.
Around 0230 GMT, the Nikkei 225 was up 0.1% at 66,445.13, while Hong Kong’s Hang Seng was down 0.6% at 25,271.53.
Shanghai’s Composite Index was up 0.4% at 3,946.64.
The dollar was trading at 153.24 yen, compared with 154.24 yen on Monday. The euro was at $1.1627, while the pound stood at $1.3540.
West Texas Intermediate crude was up 1.1% at $92.44 a barrel, while Brent crude rose 0.1% to $97.11.
In New York, the Dow was closed for a public holiday. London’s FTSE 100 finished down 0.1% at 10,822.13.
