The yen was the currency market's leading currency on Friday(24/1) ahead of a Bank of Japan policy decision that will almost certainly raise interest rates, while the dollar headed for its worst week in two months.

The BOJ ends its two-day policy meeting later in the day and markets have widely priced in a 25 basis point rate hike, with recent comments from BOJ officials also hinting at such a move.

Ahead of the decision, the yen was little changed at 156.11 per dollar, near a one-week low hit in the previous session.

The Japanese currency surged last week on rising expectations for a rate hike but has since lost some of those gains as traders also await more clarity on the BOJ's policy outlook.

"The BOJ is likely to continue hiking rates," said Vincent Chung, co-portfolio manager for T. Rowe Price's diversified income bond strategy.

"We expect this initial rate hike in 2025 to be followed by a series of gradual increases, potentially bringing the policy rate to 1% by the end of the year. The policy rate could even go beyond 1%, as it is close to the lower end of the BOJ's neutral interest rate band." Analysts said the BOJ would need to make aggressive rate hikes to prevent the yen from falling further after Friday's decision, with officials likely to need to signal further rate hikes ahead. The euro rose 0.07% to 162.66 yen in early Asia, while the pound rose 0.08% to 192.80 yen. Underscoring expectations of rising borrowing costs on Friday, data showed Japan's core consumer prices rose 3.0% in December from a year earlier, marking the fastest annual pace in 16 months. (AL)

Source: Reuters.com