A rally in the yen is gathering steam today, as traders prepare for the possibility of more aggressive or frequent rate hikes from the Bank of Japan.

-- The yen strengthened 1.6% against the dollar to 156.25 per dollar.

-- That brings the yen's two-day gain to more than 2%.

Here are a few things that are contributing to the yen's push higher:

-- BOJ Board Member Hajime Takata, a known hawk, gave a speech yesterday that suggested to investors that the central bank could hike rates as soon as this month, in what would be a break from its usual cycle of raising about every six months. "2026 represents the start of a new phase, in which rate hikes will not be carried out at a fixed pace but will instead be conducted in a nimble manner," he said.

-- Meanwhile, comments from Bank of Japan Governor Kazuo Ueda at the G-20 meeting this week were similarly interpreted by analysts as hawkish. Ueda "essentially endorsed a hike this month," wrote Derek Halpenny from MUFG today.

-- Plus, new data from S&P Global today showed that Japan's services sector expanded in August at its fastest pace in five months. That adds "to evidence of resilient domestic activity and potentially strengthening the case for further BOJ policy tightening," wrote Deutsche Bank strategist Jim Reid.

-- Lastly, investors are on high alert for the chance that officials could intervene in currency markets again. Treasury Secretary Scott Bessent helped stoke that possibility earlier this week, when he said he believed the Japanese government and the BOJ would take action that would lead to a stronger yen.