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British pound falls versus Japanese yen on hawkish BoJ expectations

Markets are pricing a Bank of Japan rate hike next month, with a Reuters poll showing 57% of economists expect a 25 bps move to 1.25% in September.

Reported · Written up by our desk · Major Pairs

The British pound weakened against the Japanese yen on Wednesday, trading about 0.2% lower around 216.85 during the European session as the yen strengthened. FXStreet said the cross moved lower because investors are increasingly pricing a potential interest rate hike by the Bank of Japan in its policy meeting next month. A Reuters poll released earlier showed 57% of economists expected the BoJ to raise rates by 25 basis points to 1.25% in September, a sharp shift from a July poll when only 5% expected a hike.

The report noted that attention will turn to Tokyo inflation data on Friday, including Tokyo CPI ex. Fresh Food, which is expected to rise 1.7% year on year versus 1.9% in July. It said that the data could influence BoJ interest rate expectations, which in turn can weigh on the pound-yen move.

FXStreet also said the pound’s broader direction in Europe will be driven by expectations for the Bank of England’s monetary policy outlook, even as the near-term swing factor remains BoJ policy expectations.

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