Yen Surge Shakes Currency Markets Amid Speculation of BOJ Rate Hike

The yen surged over 1% against the U.S. dollar to a six-week high amid strong inflation data in Tokyo, fueling speculation of a Bank of Japan rate hike. Meanwhile, the dollar faces setbacks due to lower U.S. Treasury yields and geopolitical concerns involving Trump's trade policies.

The yen surged more than 1% against the U.S. dollar on Friday after Tokyo's inflation figures exceeded expectations, propelling speculation about a potential Bank of Japan interest rate hike. Trading, thinned due to the U.S. Thanksgiving holiday, saw the dollar fall against major currencies.

According to Matt Simpson, a senior market analyst at City Index, 'The yen is capitalizing on momentum with little friction during thin holiday trade.' The dollar dropped 1.05% to 149.93 yen and previously touched 149.53 yen, marking its lowest since October 21.

Despite the dollar's earlier rise driven by Donald Trump's fiscal policies, recent days have seen it decline, with the yen poised for over 3% gains this week, reinforced by reduced U.S. Treasury yields and increased bets on a BOJ rate hike.

(With inputs from agencies.)