USD/JPY: Yen firm after surge amid Japan policy shift

The yen headed for a fourth straight week of gains against the dollar (USD/JPY) on Friday, extending its biggest one-day rally in almost a year after the Bank of Japan governor suggested the central bank may soon end its ultra-loose monetary policy.

The comments catapulted the yen to multi-month highs against several currencies. Against the dollar, it held at 144.23 after surging over 1% on Thursday – its largest daily rise since January 2022.

The shift came as Governor Kazuo Ueda said the BOJ had options for which interest rates to target when exiting negative rates. Markets saw it as the clearest sign yet of an imminent policy change.

The pound hit four-month lows against the yen, while the euro faced its biggest losing streak since 2017.

Traders are bracing for volatility at the BOJ’s Dec. 18 meeting. Recent economic weakness has emerged as a fresh concern for policymakers eyeing an exit from negative rates.