THE Japanese yen jumped to a six-week high against the dollar on Friday (Nov 29) after faster-than-expected inflation in Tokyo supported bets for a Bank of Japan interest rate hike in December.
Tokyo’s core consumer price index, which excludes volatile fresh food costs, rose 2.2 per cent year on year in November from a year earlier, up from 1.8 per cent last month and beating forecasts for a 2.1 per cent gain.
“The yen is turning into the latest momentum trade … with little friction to prevent it rising in thin holiday trade,” said Matt Simpson, senior market analyst at City Index.
Trading volumes declined heading into the US Thanksgiving holiday on Thursday, with many traders still out on Friday.
The dollar was last down 1.27 per cent at 149.62 yen, and earlier dipped to 149.47 yen, the lowest since Oct 21. It is set for a 3.38 per cent weekly loss against the Japanese currency, the largest since July.
The dollar index fell 0.31 per cent to 105.74, after earlier reaching 105.61, the lowest since Nov 12. It is on track for a 1.78 per cent rise in November as investors adjust for the likelihood that the new US administration under Donald Trump next year will loosen business regulations and enact other policies that boost growth.
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Analysts also say that proposed new tariffs and a promised clampdown on illegal immigration could reignite inflation.
Stronger-than-expected economic data has also boosted bets that the Federal Reserve will slow its pace of interest rate cuts as it approaches the neutral rate. Traders are pricing in 66 per cent odds for a 25 basis point cut at the Fed’s Dec 17-18 meeting, but only a 17 per cent chance of an additional reduction in January, according to the CME Group’s FedWatch Tool.
The next major US economic data release will be Friday’s employment report for November.
The euro gained 0.24 per cent to US$1.0578. The single currency has tumbled 2.8 per cent in November as the dollar has rallied, putting it on course for its worst month since May 2023.
Data on Friday showed that French consumer prices grew in line with expectations in November. Germany’s inflation report on Thursday showed price pressures remaining flat in November despite expectations of a second consecutive increase.
ECB policymaker Francois Villeroy de Galhau said on Thursday that the central bank should keep its options open for a bigger rate cut next month, countering hawkish comments from peer Isabel Schnabel the previous day. REUTERS
