Sterling rose in European trade on Friday against a basket of major rivals, extending gains for the fourth straight session against the yen, and scaling a 16-year peak and trading above the psychological barrier of 200 yen for the first time since 2008.

The UK-Japan interest rate gap is expected to hold for an extended duration in favor of the UK, in turn boosting the pound.

The Price

GBP/USD rose 0.7% to 196.09 yen, the highest since 2008, with a session-low at 194.33.

The pound rallied 0.6% against yen yesterday, the third profit in a row, amid renewed concerns about the UK-Japan interest rate gap.

Selloff

The yen continues to face massive selloff pressures against major rivals amid doubts about whether the Japanese authorities will actually intervene to support the yen.

The yen also lost ground after a bearish Bank of Japan policy meeting, which hurt the odds of a new Japanese interest rate hike this year.

Interest Rate Gap

The current Japan-UK interest rate gap stands at 515 basis points in favor of the UK, and such a gap will continue to underpin the pound especially as the odds of early UK interest rate cuts this year diminish.

BOJ Rates

The Bank of Japan raised interest rates in March for the first time in 17 years out of negative territory, however it almost ruled out another rate hike this year.