The yen strengthened by more than ¥5 against the dollar in two days, with dollar-yen reaching ¥155.30 in New York trading after trading in the low ¥160 range on the night of the 1st. The move gathered momentum after the pair crossed its 200-day moving average at ¥158.44, forcing leveraged investors to buy back bearish yen positions. Expectations for Bank of Japan tightening and a less hawkish Federal Reserve outlook have narrowed the perceived gap between Japanese and U.S. interest rates. Markets were pricing about a 75% probability of a 0.25-percentage-point BOJ increase at the Sept. 17-18 meeting after BOJ board member Hajime Takata argued that policymakers should adjust rates flexibly and not rule out a larger move. Fed Governor Christopher Waller said he would favor holding rates steady at the Sept. 15-16 meeting if inflation continues to ease, while CME FedWatch pricing put the probability of a September increase at 50.5%, down from 63.2%. JPMorgan estimates yen short positions at ¥16 trillion to ¥17 trillion, or about $108.8 billion, and says unwinding could accelerate below ¥155 per dollar. Speculation that the Government Pension Investment Fund could increase yen-denominated holdings also supported the currency. Bank of Japan account data, however, showed no evidence that the Ministry of Finance sold dollars and bought yen on the 2nd, undermining reports that the move reflected fresh intervention. Investors are watching U.S. August employment data, followed by inflation figures, for their implications for Fed policy and dollar-yen.