Yen extends gains as traders eye rate hike, tech rallies again

The yen extended gains Tuesday, putting it in range of a 2026 high against the dollar as investors ramp up bets on Bank of Japan interest rate hikes, while tech firms once again stood out on equity markets.

The Japanese unit has enjoyed a much-needed rally over the past week amid expectations the central bank will speed up its pace of monetary tightening in the face of surging inflation.

With some observers even predicting back-to-back hikes, the yen has climbed more than four percent against the greenback, with Monday's gains said to be helped by thin liquidity as US markets were closed for a holiday.

A historic joint intervention by authorities in Japan and the United States at the end of July sent the currency surging from a four-decade low of almost 164 per dollar but began weakening until last week, when traders began snapping it up again.

On Tuesday it briefly hit 152.89 and within distance of the 152.10 touched in February, its highest this year.

While a BoJ hike is widely expected, investors will be keeping a close eye on US consumer price data on Friday, which could be the deciding factor in the Federal Reserve decision-making on its own rates.

Blockbuster US jobs figures last week have pushed up bets on a Fed increase -- the CME Group's FedWatch tool factoring a more than 60 percent chance of such a move.

A spike in oil prices back towards $100 -- stoked by a recent flare-up in the Middle East crisis -- is adding to pressure on the US central bank, with average diesel prices in the United States hitting a record high Monday, according to the motorists' association AAA.

"The market is staring down a Fed hike, a live inflation debate, oil near triple digits, the risk of further Japanese tightening, possible capital repatriation back to Japan, renewed tariff threats against Canada," said Stephen Innes at Quintex Intel.

On the consumer price index, he added: "A soft print keeps the story manageable: resilient growth, sticky but cooling inflation, and a Fed that can still afford to wait.

"A hotter print lands very differently because oil is now moving in the wrong direction at exactly the wrong moment."

The prospect of higher US rates was also weighing on equity sentiment, though the tech sector was unaffected, with firms again enjoying healthy buying.

South Korean chipmakers SK hynix and Samsung led the way, piling on four percent and 2.5 percent respectively, while Japan's Kioxia, SoftBank and Advantest were also well up, as was Taiwan's TSMC.

That helped the Kospi in Seoul tag on around two percent though gains on the Nikkei in Tokyo were tempered by losses among exporters hurt by the strong yen.

Taipei, Shanghai, Manila and Jakarta were also higher, but there were losses in Hong Kong, Sydney, Singapore and Wellington.

Investors are looking ahead to earnings from tech titan Oracle on Thursday, which will be scoured for a fresh idea about the outlook for the AI boom.

Tokyo - Nikkei 225: UP 0.1 percent at 66,445.13 (break)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 25,271.53

Shanghai - Composite: UP 0.4 percent at 3,946.64

Dollar/yen: DOWN at 153.24 yen from 154.24 yen on Monday

Euro/dollar: DOWN at $1.1627 from $1.1632

Pound/dollar: DOWN at $1.3540 from $1.3544

Euro/pound: DOWN at 85.88 pence from 85.90 pence

West Texas Intermediate: UP 1.1 percent at $92.44 per barrel

Brent North Sea Crude: UP 0.1 percent at $97.11 per barrel

New York - Dow: Closed for a public holiday

London - FTSE 100: DOWN 0.1 percent at 10,822.13 (close)