By Karen Brettell and Harry Robertson
NEW YORK (Reuters) -The yen jumped to a six-week high against the dollar on Friday as faster-than-expected inflation in Tokyo supported bets on a Bank of Japan rate hike next month.
Tokyo’s main consumer price index, which excludes volatile fresh food costs, rose 2.2% annually in November from a year earlier, up from 1.8% last month, beating expectations for an increase of 2.1%.
“The yen is turning into the latest momentum trade… with little friction to keep it from rising in the lean holiday trading,” said Matt Simpson, senior market analyst at City Index.
Trading volumes fell on Thursday ahead of the US Thanksgiving holiday, with many traders still absent on Friday.
The dollar last fell 1.27% to 149.62 yen and previously fell to 149.47 yen, the lowest since October 21. A weekly loss of 3.38% against the Japanese currency is expected, the biggest since July.
They fell 0.31% to 105.74, after previously reaching 105.61, the lowest since November 12.
It is on track to rise 1.78% in November as investors adjust to the likelihood that the new US administration under Donald Trump will relax business rules and implement other policies that will boost growth next year.
Analysts also say proposed new tariffs and a promised crackdown on illegal immigration could reignite inflation.
Stronger-than-expected economic data has also increased expectations that the Federal Reserve will slow the pace of rate cuts as it approaches neutral rates.
Traders estimate a 66% chance of a 25 basis point cut at the Dec. 17-18 Fed meeting, but only a 17% chance of an additional cut in January, according to CME Group’s FedWatch Tool.
The next major US economic data release will be next Friday’s November employment report.
The euro gained 0.24% to $1.0578. The common currency fell 2.8% in November while the dollar recovered, putting the currency on track for its worst month since May 2023.
Data on Friday showed French consumer prices rose in line with expectations in November. Thursday’s German inflation report showed price pressures remained flat in November, despite expectations of a second straight 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, despite colleague Isabel Schnabel’s hawkish comments the day before.
climbed 2.39% to $97,414, trying to return to the record high of $99,830 set a week ago.
This month, the leading cryptocurrency is set to post a 39% jump – its best performance since February – on bets for a more favorable regulatory environment under Trump.
