Yen Soars Amid Tokyo Inflation Boost

The yen surged to a six-week high against the U.S. dollar following unexpectedly fast inflation in Tokyo, prompting speculation of a Bank of Japan rate hike. Meanwhile, the dollar weakened against most major currencies amid low trading activity due to the U.S. Thanksgiving holiday.

The yen ascended to a six-week peak against the U.S. dollar, driven by surprisingly rapid inflation in Tokyo that bolstered forecasts for a Bank of Japan rate increase next month. Currency exchange saw reduced activity due to the U.S. Thanksgiving holiday, allowing for major peers like sterling and the Chinese yuan to appreciate significantly.

Analysts suggest the yen is turning into a momentum trade with minimal resistance in thin holiday markets. Despite this, there's a possibility of reaching the day's low for USD/JPY if no new catalysts emerge. The dollar index, representing the U.S. dollar against major currencies, also declined.

Inflationary pressures and President Trump's fiscal policies have influenced currency movements. As Tokyo's core consumer price index rose, so did speculations of a BOJ rate hike, though some analysts, like Shoki Omori from Mizuho Securities, advise caution and stability in policy forecasting.

(With inputs from agencies.)