FOREX-Yen slumps after BOJ hikes rates as expected

The yen sank against its major peers in Asian trading on Friday, after a widely-expected rate hike by the Bank of Japan failed to halt the currency's decline. The ‌Japanese currency weakened as much as 0.8% to 157.145 yen per dollar, for its weakest since September 3, even as the BOJ lifted interest rates to their highest in more than three decades.

The decision was not unanimous, with two board members voting to keep policy unchanged. Against the euro, the yen was 0.8% weaker at ‌180.32 yen.

"They've just clearly underwhelmed versus expectations here," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney. "And I think that one ‌of the more staggering aspects of it was that they couldn't even get the unanimous vote for that," he said. "That really raised eyebrows in the market."

The yen's softness followed data on Friday that showed Japan's core inflation held steady near the central bank's target of 2% in August, highlighting mounting price pressures. Attention now turns to Governor Kazuo Ueda's press conference, where he will ⁠explain the ​central bank's decision.

"The market will be ⁠looking for confirmation that further normalisation remains firmly on the table, while assessing whether the Bank sees any urgency to move again," said Chris Weston, head of research at Pepperstone Group ⁠in Melbourne. The British pound was 0.1% stronger at $1.3374, after the Bank of England held interest rates on Thursday and unexpectedly paused sales of government bonds for six months.

The euro ​was 0.1% firmer at $1.1491. The Australian dollar advanced 0.3% at $0.7133 as Reserve Bank of Australia Governor Michele Bullock warned lawmakers that risks to inflation ⁠flagged by policymakers appeared to be materialising.

Its New Zealand counterpart edged up 0.1% to $0.5739. The US dollar index, which measures the greenback's strength against a basket of six currencies, was down 0.1% at 100.1900.

Traders ⁠narrowly ​expect a hike from the Federal Reserve next month as investors say they are becoming more confident in Chair Kevin Warsh's efforts to reassert the central bank's independence from the White House. Fed funds futures are pricing an implied 53% probability of a quarter-point hike at the central bank's next two-day ⁠meeting next month, compared with a 27.2% chance a week ago, according to the CME Group's FedWatch tool.

Oil prices started the day lower, with Brent crude ⁠futures off 0.9% at $103.86 a barrel, as ⁠traders reassess supply risks after Saudi Arabia and Yemen's Iran-backed Houthis traded strikes on Thursday. China has asked Tehran to help rein in the Houthis after their military blitz over the past week, three Iranian sources familiar with the matter ‌told Reuters.

In cryptocurrencies, bitcoin ‌and ether were each up 1%, at $77,288.47 and $2,474.75 respectively.