Yen records biggest weekly drop in over two months, dollar climbs

The Bank of Japan's July rate hike to 0.25% and its plan to taper bond purchases did little to stem the yen's decline. Markets viewed the move as a one-off adjustment rather than the start of a tightening cycle, the strategist added. Governor Kazuo Ueda's post-meeting comments, which stressed that further hikes depend on data, reinforced that interpretation.

Positioning data from the Commodity Futures Trading Commission showed speculative shorts on the yen rising through the week, though not yet at the extremes that preceded the late-July intervention. The risk of another round of official yen buying remains live, particularly if the pair approaches 162, the level that drew BOJ action in April, traders said. The BOJ's reserves data, released Thursday, showed no intervention during the reporting period, confirming that the July move was the last official action.

Next week brings U.S. consumer price data for July, the last major inflation print before the Fed's September meeting. A hot number would reinforce the case for holding rates higher for longer, traders said. A soft print would revive bets on a September cut. The yen's path depends on whether U.S. data shifts the rate differential further in the dollar's favor or whether Japanese authorities step in again.