Japan, Sep 18 : The Japanese yen weakened against the U.S. dollar and euro in early Asian trading on Friday as investors adopted a cautious stance ahead of the Bank of Japan’s expected interest-rate decision later in the day.
The yen slipped 0.1% to 156.19 per dollar, resuming its decline after ending a three-session losing run on Thursday. The currency was also 0.2% lower against the euro at 179.30.
Market attention remained focused on the BOJ, with traders widely expecting policymakers to raise interest rates to their highest level in more than three decades. Market pricing showed an 83% probability of a hike, while investors were also anticipating further increases at quarterly intervals, according to LSEG data.
Analysts said the rate decision itself could have a limited immediate effect because much of the expected move has already been reflected in financial markets. Instead, investors are likely to concentrate on the BOJ’s guidance regarding the pace of future policy tightening and comments from Governor Kazuo Ueda.
“Given the degree of pricing, the rate decision itself may have limited impact on the yen,” said Chris Weston, head of research at Pepperstone Group in Melbourne. He added that traders would focus on the forward swaps curve and the central bank’s signals regarding the pace and urgency of additional tightening.
Japanese inflation data released on Friday also influenced market sentiment, with price growth coming in slightly below expectations in August.
Elsewhere in currency markets, the British pound was little changed at $1.3359, near a two-and-a-half-month low. Sterling came under pressure after the Bank of England left interest rates unchanged on Thursday and unexpectedly suspended government bond sales for six months.
The euro was broadly stable at $1.1478, while the Australian dollar edged 0.1% higher to $0.7117. The New Zealand dollar slipped 0.1% to $0.5724.
The U.S. dollar index, which tracks the greenback against six major currencies, was steady at 100.2100 after retreating from a two-and-a-half-month high reached earlier in the week.
U.S. monetary policy expectations also remained in focus. Federal funds futures indicated a 53% probability of a quarter-point Federal Reserve rate increase at its next meeting, up from 27.2% a week earlier, according to CME Group’s FedWatch tool.
In commodities, Brent crude futures fell about 1% to $103.76 a barrel as traders reassessed potential supply disruptions following exchanges of strikes involving Saudi Arabia and Iran-backed Houthi forces. China has also approached Tehran seeking help in restraining the Houthis after heightened military activity over the past week, according to Iranian sources cited by Reuters.
Cryptocurrency markets remained subdued. Bitcoin was down 0.1% at $76,442.97, while ether declined 0.2% to $2,447.39.