Are the stars re-aligning for dollar-yen?

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While dollar-yen is likely to break above 100 in the coming days, according to strategists, there is skepticism over whether the pair will be able to remain above the key psychological level.

The greenback traded at a two-month peak against the yen at 99.47 on Wednesday, supported by a gradual rise in U.S. Treasury yields amid speculation the Federal Reserve could wind down its $85-billion-a-month bond-buying program sooner than expected.

Dollar-yen is closely correlated with the yield differential between 10-year Japanese government bonds and U.S. Treasurys, which has been widening over the past two weeks, say analysts.

(Read more: Be patient, the yen trade is not over yet)

One potential trigger for dollar-yen to move above 100 could be Japan's preliminary data gross domestic product (GDP) for the third quarter scheduled for release on Thursday, market participants say.

Why the yen doesn't care for Japan data
Why the yen doesn't care for Japan data

"If we get a downside surprise on GDP, that could be a catalyst for dollar-yen to move higher, as that would place pressure on the Bank of Japan to do more, or for the government to think about more aggressive stimulus," said Ray Attrill, co-head of FX Strategy at National Australia Bank.

GDP likely expanded by 0.4 percent during the July-September period from the previous three months, less than half the 0.9 percent increase in second quarter, according to Reuters.

Alternatively, continued strength in the U.S. dollar could push the pair above the key level.

(Read more: Aftermath of US shutdown continues to jolt dollar)

"The main driver behind the rise in dollar-yen is the U.S. side, which means that we need for Janet Yellen's speech in her confirmation hearing not to be too dovish," said Sean Callow, senior currency strategist at Westpac Bank.

Janet Yellen, President Barack Obama's nominee to become the Federal Reserve chair upon the expiration of Ben Bernanke's term early next year, is scheduled to testify before the Senate Banking Committee on Thursday as part of her confirmation process.

"We think it [dollar-yen] will be able to spend some time above 100, but it probably won't make a sustained break until we get a sustained recovery in the U.S., and that's not our view for the time being," said Callow, who sees dollar-yen ending the year at 99.

Callow notes that the bank does not expect tapering to take place until after the first half of 2014. Currently, most economists expect tapering will begin in March 2014.

(Read more: Here's what may trigger BOJ stimulus)

Kathy Lien, managing director of FX Strategy for BK Asset Management shares a similar view, noting that gains in dollar-yen beyond 101 will likely be difficult to achieve without a clear commitment by the Fed to taper asset purchases before March 2014.

From a technical perspective, Daryl Guppy, an independent technical analyst, says a close above 102 would indicate a more sustainable uptrend for the currency pair.

—By CNBC's Ansuya Harjani; Follow her on Twitter:@Ansuya_H