BOJ Rate Hike Expected as Yen Weakens Amid Inflation Concerns

The yen began the trading week weak against both the US dollar and euro on Friday as markets anticipated an interest rate hike from the Bank of Japan. The Japanese central bank is expected to raise rates to their highest level in over three decades, with swaps pricing indicating a 83% likelihood.

Data released on Friday showed inflation in Japan was slightly below expectations in August. Chris Weston, head of research at Pepperstone Group, noted that while the rate decision may have limited impact on the yen, forward swaps curve and the bank's guidance around future tightening will be crucial.

The yen fell 0.1% to 156.19 per dollar and 0.2% against the euro at 179.3000 yen. Oil prices also declined, with Brent crude futures dropping 1% to $103.76 per barrel as traders reassessed supply risks following recent military strikes between Saudi Arabia and Yemen's Iran-backed Houthis.