Yen hits six-week high, dollar falls at end of month

(New York afternoon trading update)

Authors: Karen Brettell and Harry Robertson

NEW YORK, Nov 29 (Reuters) – The yen jumped to a six-week high against the dollar on Friday after faster-than-expected inflation in Tokyo bolstered expectations the Bank of Japan will raise interest rates next month.

Excluding the volatile cost of fresh food, Tokyo’s core consumer price index rose 2.2% year-on-year in November, up from 1.8% the previous month and exceeding expectations for a 2.1% increase.

“The yen is emerging as the latest momentum trade… with little resistance to prevent the yen from rising in thin holiday trading,” said Matt Simpson, senior market analyst at City Index.

Trading volumes were down on Thursday heading into the U.S. Thanksgiving holiday, with many traders still absent on Friday.

The U.S. dollar latest fell 1.27% against the yen to 149.62 yen. It fell to 149.47 yen earlier, the lowest level since October 21. USD/JPY is expected to drop 3.38% on a weekly basis, its biggest drop since July.

The U.S. dollar index fell 0.31% to 105.74, after hitting its lowest since November 12 at 105.61.

The index is on track to gain 1.78% in November as investors adjust to the possibility that the new U.S. administration under Donald Trump will loosen business regulations and enact other pro-growth policies next year.

Analysts also said proposed new tariffs and a pledge to crack down on illegal immigration could reignite inflation.

Stronger-than-expected economic data also boosted bets that the Federal Reserve will slow the pace of interest rate cuts as it approaches neutral.

Traders see a 66% chance of a quarter-point rate cut by the Fed at its Dec. 17-18 meeting, but only a 17% chance of a further rate cut in January, according to CME Group’s FedWatch tool.

The next major U.S. economic data will be the November jobs report next Friday.

EUR/USD rose 0.24% to $1.0578. As the dollar rose, the single currency fell 2.8% in November, which would be its worst month since May 2023.

Data on Friday showed French consumer prices rose in line with expectations in November. Germany’s inflation report on Thursday showed price pressures remained flat in November despite expectations for a second straight rise.

European Central Bank policymaker François Villeroy de Gachau said on Thursday the central bank should keep open the option of a deeper interest rate cut next month, rebutting hawkish comments from her counterpart Isabelle Schnabel the day before.

Bitcoin rose 2.39% to $97,414, trying to regain its all-time high of $99,830 from a week ago.

This month, the leading cryptocurrency is expected to rise 39%, its best performance since February, on bets that the regulatory environment will be more favorable under Trump. (Reporting by Karen Brettell and Harry Robertson; Editing by Jonathan Oatis and Deepa Babington)