Forex
Home›Forex›Major Pairs›Pound firms to monthly high versus yen as carry trade…
Pound firms to monthly high versus yen as carry trade stays active
GBP/JPY is holding above 217.0 while the yen stays under pressure despite expectations for faster Bank of Japan rate hikes.
The GBP/JPY cross moved higher into the early European session, drawing dip-buyers near 216.2 and reaching a fresh monthly high, with spot trading just above 217.0, according to FXStreet.
FXStreet links the move to a broadly weaker Japanese yen, noting Japan still has meaningfully lower borrowing costs than the UK despite expectations of faster rate hikes by the Bank of Japan. That interest rate gap keeps the carry trade active, while concerns about Japan’s worsening fiscal conditions further weigh on the yen.
FXStreet also cites a policy dilemma for the BoJ, saying the pressure to tighten is mounting to support the currency even though domestic price pressures remain modest. It adds that the market reaction to a rare joint US and Japan currency intervention was short-lived, as traders instead focus on central bank policy paths.
Beyond policy, FXStreet says worries about economic strain in Japan, including disruptions linked to the protracted Middle East conflict affecting the Strait of Hormuz, are favoring JPY bears. On the other side, it notes GBP is capped by a modest US dollar uptick, but overall the fundamental backdrop still points to upside for GBP/JPY, with pullbacks more likely to be bought into and stay limited.