Currency exchange: why is the British Pound so strong against the Japanese Yen at the moment?
General information on the Internet highlights that as interest rates rise, as long as inflation is lower, that a currency tends to strengthen. However, with respect to the pound and the yen currently are there any other significant factors?
Well, as you mention in your own question, the currency with the higher interest rate should be stronger. Interest rates in the UK are at, what, 5.75%? The yen is still at a paltry 0.05%. There's no mystery here. Inflation is in check in both countries, in fact, the BOJ is still more worried about deflation. Even though the Japanese economy is doing well recently, BOJ policy simply gives traders no reason to buy yen.
The yen will probably continue to trade lower against all major currencies for a while longer. If you bet on the yen you will be swimming against the tide for the foreseeable future. In the long term, the yen is probably trading at a discount to its true value vs the pound (interest rates in the UK just have to start coming down eventually), but jumping the gun on that contrarian play could be like stepping in front of a freight train. The herd is on the move, and they will continue selling yen for a while longer.
There is some kind of bond between the Yen & the dollar. The dollar is currently also losing value.
If the Japanese are backing the value of the Yen with lots of American dollars, when the U. S. Dollar goes down in value the Yen will go down in value also.
The best place right now, in my opinion, to keep the 'value' of your money is to invest in Gold.
As far as countries that have the most favorable trading status with the United States, Japan and the UK are way up there. Currencies for such countries should be strong. So why the discrepancy?
Currency traders have always been a little scared of the yen due to many signs that the Japanese economic structure is more corrupt and prone to instability and overheating than other top world economies. For example, the Yakuza (Japan's mafia) are rumored to have a very big presence in the Japanese banking system. I recall years back, following the Japanese banking 'collapse' that at a least a couple special investigators into banking corruption were murdered gangland style.
The Japanese economic structure is also less transparent and appears to be far more regulated in certain areas than its western counterparts. Seems to be the Asian way. Currency traders hate economies that can't be read like open books, even if the economy in question appears to be successful.