Pound Hits Two-Week Low vs Firming Yen Amid BoJ Hike Bets, Intervention Risks

The British Pound hit a two-week low against the Japanese Yen on Monday, as investors bet on further interest rate hikes by the Bank of Japan and weighed risks of intervention. The GBP/JPY cross dropped to around 207.80-207.70 region after an intraday uptick to 209.00 neighborhood, down about 0.30% for the day.

The Bank of Japan's (BoJ) July monetary policy meeting minutes revealed policymakers discussed faster interest rate hikes due to growing concerns over inflation risks. Expectations of another hike by October or December boosted demand for the Japanese Yen, which in turn put downward pressure on the GBP/JPY cross.

Japan's Finance Minister Satsuki Katayama said US President Donald Trump expressed concerns about the JPY's depreciation to Prime Minister Sanae Takaichi last week. This fueled speculations of potential joint currency interventions favoring JPY bulls.

However, a modest weakness in the US Dollar benefited the British Pound, limiting losses for the GBP/JPY cross. Bank of England Governor Andrew Bailey said on Friday that high energy prices would make it harder to keep interest rates on hold. This shift in tone towards higher borrowing costs could lend some support to the GBP and the GBP/JPY cross.