The Zhitong Finance App notes that the yen strengthens as market speculation that the Bank of Japan may raise interest rates in the next few months continues to heat up.

On Friday, the yen rose 0.2% to 159.15 against the US dollar, breaking away from the 160 mark that traders are closely watching. Previously, the market feared that hitting this mark might trigger government intervention to support the yen.

The media quoted people familiar with the matter on Thursday as reporting that in order to cope with the weakening yen, the government led by Prime Minister Takaichi Sanae supports the Bank of Japan's recent interest rate hike, and the next move is likely to be in September or October. A Friday report said that the Bank of Japan is considering raising interest rates as early as September.

As investors have begun to re-establish arbitrage transactions using yen as the financing currency, the yen has already released most of its gains after the joint intervention of the US and Japan last month. Huge interest spreads between Japan and other major economies, as well as ongoing concerns about the country's fiscal outlook, continue to put pressure on the yen.

Overnight index swaps show that the probability that the Bank of Japan will raise interest rates before September is about 80%, and the October rate hike has been fully factored into the pricing by the market.

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