The Japanese yen strengthened against the U.S. dollar on Friday after the Bank of Japan (BOJ) held rates steady but revealed two board members favored a hike. The unexpected dissent signaled that future policy tightening could come sooner than markets anticipated, unsettling equities and bonds.
Invesco strategist David Chao said the BOJ’s October 30 meeting now looks like “the best chance for a rate hike this year.” The yen briefly surged, though it later eased, leaving the dollar down 0.1% at 147.8 yen. Governor Kazuo Ueda emphasized that rate hikes would continue if the bank’s economic outlook holds.
Meanwhile, sterling fell 0.5% to $1.3484—its sharpest two-day slide since July—after Britain’s borrowing figures overshot forecasts, complicating Finance Minister Rachel Reeves’s November budget plans. Analysts say fiscal pressure is weighing heavily on the pound despite better-than-expected August retail sales.
Across markets, traders expect a U.S. Federal Reserve rate cut in October, with CME data showing an 89.8% chance of a 25-basis-point reduction. Overseas investors continued boosting U.S. Treasury holdings, led by Japan and the UK. The euro slipped 0.23% to $1.1760 but remained on track for its third consecutive weekly gain, supported by stable ECB policy expectations.
