Yen Slips Ahead of BOJ Rate Hike as Traders Wait for Ueda's Guidance

The yen has weakened against the US dollar as traders anticipate a Bank of Japan rate hike and await Governor Kazuo Ueda's comments on future interest rates. The decision to raise rates is considered almost certain, with an 83% chance priced into interest-rate swaps.

Investors expect the BOJ to increase rates about once every quarter, but the softer-than-expected August inflation reading has tempered expectations for a rapid pace of hikes. This uncertainty is why Governor Ueda's press conference at 6:30 GMT is being closely watched.

The yen's value has been affected by the gap between Japan's low interest rates and higher US rates, making it cheap to borrow yen and invest in higher-yielding assets elsewhere. If the BOJ's expected pace of hikes changes, this 'carry trade' math will also shift, potentially supporting or pressuring the yen.