Yen Surges as BOJ Set to Hike Rates Amid Global Economic Shifts

The yen is poised for its strongest weekly performance in over a month, amid expectations of a Bank of Japan rate hike next week. Meanwhile, U.S. dollar faces pressure from Trump's White House return and potential Federal Reserve rate cuts. Investors await policy clarity amid shifting global economic dynamics.

The yen is on track for its best weekly performance in over a month as the Bank of Japan (BOJ) is anticipated to raise interest rates next week, putting the U.S. dollar under pressure ahead of former President Donald Trump's potential return to the White House. With Japanese officials hinting at a rate change and data showing ongoing price pressures and wage growth, traders have priced in an 80% likelihood of a hike.

Reported sources suggest the BOJ is likely to proceed with the rate increase unless disrupted by market shocks during Trump's office transition. This week, the yen gained more than 1% against the dollar, though it weakened slightly to 155.62 per dollar on Friday, near Thursday's one-month high of 155.10.

In contrast to other central banks, the BOJ benefits from the Federal Reserve's recent hawkish pivot, allowing it to hike rates with minimal currency volatility. The euro remained steady, sterling unchanged, while the dollar index experienced a significant drop, ending a six-week upward trend given traders' prospects of potential rate cuts amid easing U.S. inflation concerns.

(With inputs from agencies.)