BOJ Rate Hike Expectations Send Yen into Weakness

The Japanese yen began trading weakly against the US dollar and euro on Friday as markets anticipated an expected rate hike from the Bank of Japan.

Ahead of the BOJ's decision, swaps pricing indicated a market view that a hike was 83% likely, with quarterly rate hikes expected to follow. This level of pricing suggests that the rate decision itself may have limited impact on the yen, according to Chris Weston, head of research at Pepperstone Group.

Weston emphasized that Governor Ueda's press conference will be key in providing guidance around the pace and urgency of further tightening. The market will be looking for confirmation that further normalization remains firmly on the table.