WASHINGTONLONDON, Dec 7 Reuters The yen staged its biggest oneday rally in almost a year on Thursday after Japanese monetary authorities offered a surprisingly clear hint at a shift in policy, while the euro headed for its biggest weekly fall since May.

The dollar index eased ahead of Friday39;s U.S. nonfarm payrolls report, under pressure mostly from the yen, which rose by nearly 2 to its strongest in three months.

Bank of Japan BOJ Governor Kazuo Ueda said on Thursday the central bank has several options on which interest rates to target once it pulls shortterm borrowing costs out of negative territory.

Markets took this as a potential sign that change may be imminent and pushed the yen higher.

The comments last night sort of poured rocket fuel into bets on an eventual move back into positive rates territory for the Bank of Japan, said Karl Schamotta, chief market strategist at Corpay in Toronto.

The dollar was last down 2.01 against the yen at 144.35.

The BOJ has been the lone holdout among central banks, by maintaining a policy of ultralow rates that sent the yen to its weakest in decades against the dollar and sparked speculation that monetary authorities could intervene to prop up the currency.

The market is very, very heavily short the yen and weve got a heavy consensus in for 2024 that this is going to be the year that they bring negative rates to an end. So it shows the market is ready to latch on absolutely anything that it can in light of that,…