GBP Hits New Monthly High vs JPY as Carry Trade Persists

The British Pound (GBP) has reached a new monthly high against the Japanese Yen (JPY), touching 217.00 during the early part of the European session on Monday.

This move comes despite expectations of faster interest rate hikes by the Bank of Japan (BoJ), which could have strengthened the JPY.

However, borrowing costs in Japan remain lower than in other major economies, including the UK, keeping the 'carry trade' active and contributing to the GBP's strength against the JPY.

Analysts at Danske Bank note that the pressure on the BoJ to tighten monetary policy is growing to support the yen, but they caution that this decision is not straightforward due to modest domestic price pressures.

The market reaction to a rare joint currency intervention by the US and Japan was short-lived, with traders remaining focused on central bank policy paths and Japan's economic woes due to the Middle East conflict.