The Japanese yen has surged to its strongest level against the dollar in six weeks, spurred by higher-than-expected inflation data that suggests a potential interest rate hike.
November's Tokyo core consumer price index rose 2.2%, exceeding market expectations and indicating increasing inflationary pressures within Japan, which is influencing a possible policy shift by the Bank of Japan.
Market participants are now pricing in a 57% probability of a quarter-point rate hike by the Bank of Japan in December, reflecting growing expectations for tighter monetary policy.
Geopolitical tensions and worries over U.S. trade disruptions have increased demand for haven assets, providing an additional boost to the yen's recent rally.
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