Yen Surging - This May Be It For The Summer

The U.S. dollar is down more than 1.0% against the Japanese yen this morning, trading around ¥96.70.

Overnight, the Japanese Nikkei 225 fell 4.0%.

The Bank of Japan is in the midst of its two-day policy meeting, the results of which will be announced Thursday morning in Japan.

Economists expect little change to policy from the meeting.

"This may well be the move that sees yen bears throw in the towel for the rest of this summer," says Société Générale global strategist Kit Juckes. "The [Bank of Japan] is unlikely to make policy changes this week, but that doesn’t justify the yen’s recent strength. I’m not inclined to put it down to anything other than repeated failure to see USD/JPY settle above 100, or benefit from the combination of higher Treasury yields and higher U.S. equity indices."

"Let’s face it," says Juckes. "The yen has weakened a lot this year, and settling in a USD/JPY 95-100 [range] with reduced volatility probably suits both the U.S. and Japanese authorities far better than it suits our forecasts."