British Pound trades lower against Japanese Yen amid intervention fears

The British Pound (GBP) recovers some of its early losses against the Japanese Yen (JPY) during the European trading session on Friday, but is still down around 0.17% to near 209.45. The cross is under pressure as the Japanese Yen outperforms across the board due to growing fears of coordinated intervention by the United States (US) and Japan to support the currency.

The possibility of US-Japan joint intervention has increased after remarks from Japanese Finance Minister (FM) Satsuki Katayama delivered in a press conference earlier in the day, saying that US President Donald Trump expressed concern over the Yen's weakness during his meeting with Japanese Prime Minister (PM) Sanae Takaichi in New York on Tuesday, Reuters reported.

Japan FM Katayama added, "The principles since the previous joint intervention ⁠remain alive,. Katayama referred to the July 31 operation in which Tokyo ​and Washington intervened jointly to counter excessive volatility and disorderly market moves.

The Asia-Pacific currency has regained ground after underperforming since the Bank of Japan’s (BoJ) monetary policy announcement.

Yen sold off as BoJ hike draws dissent and lifts USD/JPY above 157

Analysts at MUFG/BTMU highlight that while the BoJ “raised its policy rate by 25bp as expected,” the decision nonetheless triggered renewed Yen weakness. They note that the currency was sold aggressively after “two policy board members voted against the decision,” a development that investors interpreted as undermining the conviction behind the move and helped drive “the USD/JPY above 157.”

On the British Pound front, market experts question elevated hawkish Bank of England (BoE) expectations.

Strategists at Brown Brothers Harriman (BBH) highlight a growing disconnect between market pricing and their own expectations for the BoE policy path. They note that “the swaps curve continues to imply about 100bps of BoE rate hikes in the next twelve months to 4.75%,” but argue that “the BoE may not need to tighten as much as markets expect,” adding that rates are already in the 2%-4% neutral range.