The British Pound reached its highest level against the Japanese Yen in more than a week during Asian trading today, only to give back some of those gains later. The GBP/JPY pair, which had climbed as high as 187.65, fell back to around 187.25. This fluctuation came as investors reacted to expectations of a shift in the Bank of Japan‘s (BoJ) negative interest rate policy by early next year. Despite the decline, Japan’s core consumer inflation figures remain above the central bank‘s target, suggesting that inflationary pressures remain.
The Yen found support as Asian equity markets pointed to a risk-off sentiment among investors. Meanwhile, comments from Bank of England (BoE) Governor Andrew Bailey earlier this week continued to influence market dynamics. Speaking at a Treasury Select Committee hearing, Bailey emphasized the need for continued restrictive monetary policy to address inflationary concerns, which supported the Pound.
Further support for the British currency came from the latest UK economic data. The robust services and composite indices from the latest UK Purchasing Managers’ Index (PMI) readings have pointed to continued economic expansion, providing a buffer against more significant declines in the GBP/JPY exchange rate.