EUR/JPY rises to all-time-high of 171.60 and then retreats

EUR/JPY rose to a new all-time high of 171.60 early on Monday before collapsing and retreating over a percentage point, due to direct intervention by the Japanese Ministry of Finance (MOF) to prop up the Japanese Yen (JPY), it was rumored. 

The EUR/JPY beat its previous record high of 169.97 set in 2008, in the early hours of Monday morning, however, it swiftly began to decline thereafter, reaching 165.64 by the time Europe was arriving to work at 07:00 GMT. Since then it has recovered a little, rising back above 167.00 on the back of firm inflation data from Germany and Spain. 

The decline has been put down to rumors of a massive currency intervention by the Japanese authorities. It is possible the move came given the countless verbal warnings from the Japanese Minister of Finance Shun’ichi Suzuki over recent weeks, in which he repeated he was watching currency moves carefully and would intervene if necessary. 

German and Spanish inflation data show signs of stickiness

In Europe, meanwhile, the release of the Harmonized Index of Consumer Prices (HICP) for April, the European Central Bank’s (ECB) preferred inflation gauge, in Germany and Spain, painted a picture of persistent inflation. 

The data suggests interest rates may need to remain higher for longer in the Eurozone to bring down inflation. This in turn could provide support for the Euro (EUR) since higher interest rates attract greater foreign capital inflows.

The HICP for Germany rose by 2.4% in April year-over-year, which was slightly above the 2.3% expected, and 2.3% previous, data from the Federal Statistics Office of Germany showed. 

On a monthly basis, German HICP rose 0.6% in April according to preliminary estimates – the same as forecast and previous. 

In Spain, HICP rose 3.4% YoY in April compared to 3.3% in the previous month, and 0.6% on month, from 1.4% previously, according to data from INE.