The yen spiked to a seven-month high against the U.S. dollar on Tuesday on rising expectations that the Bank of Japan might move away from its ultra-easy monetary policy.
Speculation that the BOJ was set to start shifting off its ultra-loose policy flared when the central bank widened the yield cap range on 10-year Japanese government bonds last month, and it was further fuelled by a Nikkei report on Saturday that the BOJ was considering raising its inflation forecasts in January to show price growth close to its 2% target in fiscal 2023 and 2024.
The yen strengthened 0.69% versus the greenback at 129.83 per dollar on Tuesday, having touched 129.51 earlier in the session - a level last seen in June. The U.S. central bank raised interest rates by 50 basis points last month after delivering four consecutive 75-basis point hikes in the year, but has said it may need to keep interest rates higher for longer to tame inflation.
The dollar index , which measures the greenback against six major currencies, has made a subdued start to 2023 and was last down 0.029% at 103.610. The dollar index rose 8% last year in its biggest annual jump since 2015 on the back of the Fed raising interest rates to tackle inflation.
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