The Japanese currency has been recovering in recent days, after having been penalized in previous months. This recovery is happening for the second consecutive day, with the yen registering significant gains against other currencies.
The main catalyst for this appreciation was comments made by a Bank of Japan governor. The official admitted the possibility of an interest rate hike exceeding 25 basis points, which came as a surprise to financial markets.
This expectation of a more aggressive intervention by the Japanese central bank sparked investor demand for the yen. Investors anticipate that the Bank of Japan will adopt a tighter monetary policy, which typically supports the value of the domestic currency.
The context for this appreciation is related to the difficult period the yen has been going through recently, losing ground against other major currencies. Expectations of a more restrictive monetary policy in Japan are now counteracting this weakness trend.
