The dollar reached its highest level against the yen in four years on Wednesday, fueled by expectations of differing monetary policy paths between the U.S. Federal Reserve and the Bank of Japan.

The dollar climbed as high as 107.20 yen, marking its strongest point since September 2008. This surge reflects increasing market sentiment that the Federal Reserve will soon begin raising interest rates, while the Bank of Japan is expected to maintain its aggressive monetary easing policies for the foreseeable future.

Analysts attribute the dollar’s strength to a combination of factors, including positive U.S. economic data and comments from Fed officials suggesting a hawkish stance on inflation. Conversely, the yen has been weighed down by Japan’s ongoing efforts to stimulate its economy through quantitative easing and negative interest rates.

The widening interest rate differential between the two countries is making the dollar a more attractive investment compared to the yen, further contributing to the currency’s appreciation.

Market participants are closely watching upcoming economic data releases and central bank announcements for further clues about the future direction of monetary policy in both the U.S. and Japan.