Japanese yen hits near two-week high

The Japanese yen strengthened past 155.3 per dollar, reaching its highest level in nearly two weeks, supported by rising expectations of a rate hike from the Bank of Japan.

On Monday, Governor Ueda stated that the BOJ is carefully weighing the “pros and cons” of a potential interest rate hike at its upcoming policy meeting on December 18–19, assessing conditions in the domestic economy, inflation, and global financial markets.

With concerns over tariff-related headwinds easing, Ueda expressed confidence that the economy will rebound from a Q3 contraction. He also highlighted that the labor shortage remains acute, corporate profits continue to be strong, and the main business lobby has urged its members to persist in raising wages.

Markets now price in roughly an 80% chance of a hike, notably higher than around 60% last week.

Externally, the yen received additional support from the weakening US dollar amid rising bets of a 25?bps cut at the Fed’s policy meeting next week.