GBP Weakens Against JPY Amid BoJ Rate Hike Bets

The British Pound (GBP) has weakened against the Japanese Yen (JPY) amid speculation that the Bank of Japan (BoJ) will raise interest rates at its September meeting. The GBP/JPY cross fell to a near-6-year low of around 216.85 during the European trading session, with the JPY strengthening as investors price in an interest rate hike.

Scotiabank strategists note that Japan's July inflation figures maintained their upward trend, rising to 1.9% year-on-year (YoY), in line with expectations. This has added marginally to conviction that the BoJ will tighten next month, with 20bps or hikes reflected in swaps.

The August 17-24 Reuters poll released earlier in the day showed that 57% of economists expected the BoJ to raise its interest rates by 25 basis points (bps) to 1.25% in September, a sharp turnaround from a July poll when just 5% expected an interest rate hike move.