The yen remained weak across the board after the Bank of Japan (BoJ) left interest rates unchanged overnight, while the pound rose sharply after strong inflation data increased the chances of UK interest rates rising as early as April. The BoJ left its overnight call rate target unchanged at 0.50 pct, as expected, while the accompanying statement continued to suggest that interest rates will not rise again any time soon, allowing the yen to weaken further. "There is little room for the yen to rally in this environment," analysts at BNP Paribas said. The BoJ said it expects annual core inflation to stay "around zero in the short run, due to the drop in the prices of crude oil". Governor Toshihiko Fukui also reiterated in the accompanying press conference that adjustments to interest rates would continue to be gradual. The yen has come under pressure at the start of this week as equity markets rebounded and investors resumed carry trades -- when money is borrowed in countries with low interest rates such as Japan in order to invest in higher-yielding assets elsewhere -- that had recently begun to unwind. Overnight today, the dollar rose close to the 118 yen mark to reach a 12-day high, while the euro also came close to the 157 yen level. Against the pound, however, the yen was particularly weak, with the UK currency surging to reach a two-and-a-half week high of 230.61. The pound rose sharply across the board after the release of stronger-than-expected inflation increased the prospect of the Bank of England raising interest rates again sooner rather than later, possibly as soon as April. Figures this morning showed the key UK annual CPI inflation rate unexpectedly rose to 2.8 pct in February from 2.7 pct in January, well above the central bank's target rate of 2.0 pct. "We suspect the chances of a hike next month are above 50 pct. A rebound in retail sales on Thursday could help reinforce this notion," said Zaki Kada at Thomson IFR Markets. The news pushed the pound up to an 18-day high against the dollar of 1.9563 usd, while the euro hit a low of 0.6787 stg. Further details on the outlook for interest rates will be provided in tomorrow's minutes to the BoE's Monetary Policy Committee meeting earlier this month, where rates were left on hold at 5.25 pct. Elsewhere, the high-yielding Australian dollar was a major beneficiary of the resumption in carry trades, rising above the 0.80 mark against the dollar to touch a nine-year high of 0.8035 usd. HBOS currency analyst Naeem Wahid also noted that the move higher has also been supported by interest rate expectations, with the market now moving to discount another 25 basis point increase in Australian interest rates. The currency came off highs in early London trade but continues to trade around the 0.80 usd mark. Today, housing starts data are released out of the US, though focus will centre on the rate-setting meeting of the Federal Open Market Committee, which begins today with a decision set for tomorrow. Interest rates are fully expected to be left on hold. The market will therefore be looking to the Federal Reserve's accompanying statement to see whether there is any hint of a move away from the current bias to tighten monetary policy, as well as any reaction to the recent turmoil on financial markets.