The Japanese yen surged against the US dollar this week, gaining 1.2% to trade at 129.50, amid mounting speculation that the Bank of Japan (BoJ) could tweak its ultra-loose monetary policy. The yen’s rally was sparked by comments from BoJ officials hinting at the possibility of adjusting yield curve controls to address rising inflation, which recently hit a 40-year high.

Forex traders responded swiftly, with increased demand for the yen as a safe-haven currency. The yen’s gains came at the expense of the US dollar, which faced pressure from softer-than-expected economic data and reduced expectations for further Federal Reserve rate hikes. Elsewhere, Asian currencies like the Chinese yuan and South Korean won also posted gains, supported by optimism surrounding regional economic recovery. Analysts believe the yen could maintain its upward momentum if the BoJ follows through with policy adjustments. However, any unexpected moves from the central bank could introduce volatility in the forex market.