FX.co ★ Japanese Yen Hits Near 2-Week High

The Japanese yen strengthened beyond 155.5 per dollar, continuing its upward trend from the previous week and reaching its highest point in almost a fortnight. This movement was fueled by increasing anticipations of a policy rate hike by the Bank of Japan. The swap market currently indicates about a 62% probability of a rate hike at the central bank's policy meeting on December 19, with this likelihood escalating to nearly 90% by the January meeting. Speculations of a December rate increase have heightened after the yen experienced a 5% depreciation against the US dollar this quarter, coupled with ongoing inflation surpassing the central bank's 2% target. Additionally, the yen found further support as the US dollar weakened, with markets now pricing in an 87% chance of a 25 basis point cut during the Fed's policy meeting next week. Concurrently, Japan's manufacturing PMI for November 2025 was slightly adjusted downward to 48.7 from the preliminary estimate of 48.8, following a final reading of 48.2 in the prior month.