Yen May Weaken Ahead of BOJ Rate Decision

The Bank of Japan (BOJ) is set to make its decision on interest rates this Friday, and according to Wells Fargo and Citigroup strategists, the yen could weaken as a result.

Pricing in interest rate swaps suggests that a quarter-point move at the meeting is nearly certain, but traders are watching for guidance from BOJ Governor Kazuo Ueda on what's next.

In recent years, a wide rate differential with other major economies has weighed heavily on the yen. On Wednesday, the Federal Reserve enacted its first interest-rate increase in three years, which coincided with a drop in the yen, and Chairman Kevin Warsh signaled that the Fed would continue to combat inflation.

Citigroup projects the yen could reach 159 per dollar in the coming weeks, while ING Bank's Chris Turner expects it to weaken to around 157-158 if the BOJ does not signal further rate hikes.