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EUR/JPY tests two-week lows at 183.30 amid generalised Euro weakness

  • The Yen appreciates against the Euro on the aftermath of the US intervention in Venezuela.
  • BoJ Governor Ueda confirmed the bank's commitment to higher interest rates.
  • In Europe, the focus is on January's Sentix Investors' Confidence Index.


The Euro has opened the first full week of 2026 in a weak tone and is trading lower against a somewhat firmer Japanese Yen. The pair accelerated its reversal from Friday’s highs, at 184.40, and is testing the bottom of the last two-week trading range, at 183.30, at the time of writing.

The safe-haven Japanese Yen is faring better than the common currency upon return from the Christmas holidays, amid rising geopolitical tensions following the US intervention in Venezuela this weekend.

Venezuelan President, Nicolas Maduro, is expected to appear in front of a US Court on Monday, and President Donald Trump has threatened a second round of attacks if the authorities fail to cooperate with the US plans for the country’s Oil industry and stop drug trafficking.

Earlier on Monday, the Governor of the Bank of Japan, Kazuho Ueda, provided some additional support to the Yen, reiterating the central bank’s commitment to normalising its monetary policy. Ueda pledged to keep raising rates in the coming months if wages and prices continue their moderate growth trend.

In Europe, the primary focus on Monday will be on the release of January’s Sentix Investors’ Confidence. The index reviews institutional investors’ feelings about the current economic situation and has been posting negative readings since August, reflecting a downbeat sentiment.

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

Guillermo Alcala

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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