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EUR/JPY holds below 184.00 as Japanese Yen steadies on suspected Japanese intervention

  • EUR/JPY weakens as Japanese Yen steadies amid caution following suspected Japanese intervention last week.
  • Commerzbank’s Volkmar Baur said authorities likely intervened near USD/JPY 157.00 after the pair briefly hit 160.72.
  • The Euro weakens after US repelled Iranian attacks in Hormuz and an Iranian drone reportedly struck UAE’s Fujairah port.

EUR/JPY extends its losses for the second consecutive day, trading around 183.80 during the Asian hours on Tuesday. The currency cross weakens as the Japanese Yen (JPY) stabilizes against major peers amid cautious trading, following suspected intervention by Japanese authorities last week. Japanese Finance Minister Satsuki Katayama said Japan stands ready to act against speculative foreign-exchange moves to limit JPY weakness.

Commerzbank’s Volkmar Baur noted that authorities appear to have intervened near USD/JPY 157.00 after the pair briefly surged to 160.72. Tokyo inflation data showed headline gains driven entirely by energy, while core inflation slipped to a one-year low. The bank cautioned that conflict-related sentiment may keep core inflation subdued, reducing the likelihood of Bank of Japan rate hikes and weighing on the Japanese Yen.

Meanwhile, the EUR/JPY cross declines as the Euro (EUR) comes under pressure amid escalating Middle East tensions, which have dampened risk appetite and threaten to disrupt the four-week ceasefire between the United States (US) and Iran. US forces repelled Iranian attacks while escorting two US-flagged vessels through the Strait of Hormuz, and the UAE’s Fujairah port was reportedly struck by an Iranian drone.

Iranian parliament speaker Mohammad Bagher Ghalibaf said on X that “The new equation of the Strait of Hormuz is taking shape. The security of shipping and energy transit has been undermined by the United States and its allies through ceasefire violations and blockade measures; however, their actions will ultimately fail. We fully understand that maintaining the current situation is unacceptable for the US, while we have not even begun yet.”

Bank of Japan FAQs

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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