EUR/JPY draws some sellers below 162.00 on BoJ ask

VaselineAugust 23, 2024

0 2 minutes read

EUR/JPY draws some sellers below 162.00 on BoJ ask

EUR/JPY loses momentum around 161.95 in the Asian session on Friday.
The BoJ’s Ueda reiterated his determination to hike if inflation remains on track to sustainably reach the 2% target.
The ECB’s Kazaks said he was ready to discuss another interest rate cut at the September meeting.

The EUR/JPY cross eases to near 161.95, snapping a two-day winning streak during Asian trading hours on Friday. The Japanese Yen (JPY) is strengthening amid dovish remarks from Bank of Japan (BoJ) Governor Kazuo Ueda.

BoJ Governor Kazuo Ueda told Japan’s parliament on Friday that Japan’s central bank raised interest rates in July as the economy and inflation moved in line with the protection of the price target. Ueda also said he expects to adjust policy if the economy moves according to plan, while saying the BoJ’s policy path to a neutral interest rate remains highly uncertain. Soviet remarks by Japanese authorities are likely to support the JPY in the short term.

In addition, Japan’s consumer price index (CPI) inflation in July remained above the BoJ’s 2% target, raising expectations that the Japanese central bank will raise rates again. Core CPI inflation, which excludes fresh food prices, rose to 2.7% year-on-year in July from 2.6% in June, in line with market expectations. The national CPI rose 2.8 percent from a year ago in July, compared with 2.8 percent in the previous reading, Japan’s Statistics Bureau reported on Friday.

On the other hand, investors expect the European Central Bank (ECB) to further loosen its monetary policy, which weighs on the euro (EUR). Markets have pegged a nearly 90 percent chance of a 25 basis point (bps) cut in the deposit rate to 3.5 percent in September and will see at least one more move before the end of the year. Martins Kazaks, a member of the Governing Council of the European Central Bank (ECB), said on Thursday that he was ready to discuss a further interest rate cut at the September meeting, expressing confidence in inflation returning to 2%, as well as concerns about of economics, according to Bloomberg.

Frequently Asked Questions about the Japanese Yen

The Japanese yen (JPY) is one of the most traded currencies in the world. Its value is largely determined by the performance of the Japanese economy, but more specifically by Bank of Japan policy, the difference between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the yen. The BoJ has intervened directly in currency markets on occasion, generally to depress the yen, although it refrains from doing so because of the political concerns of its main trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the yen to depreciate against its major peers. This process has been exacerbated more recently by a widening policy divergence between the Bank of Japan and other major central banks, which have opted to raise interest rates sharply to combat decades-high levels of inflation.

The BoJ’s stance of sticking to ultra-loose monetary policy has led to increased policy divergence with other central banks, particularly the US Federal Reserve. This supports a widening of the spread between US and Japanese 10-year bonds, which favors the US dollar against the Japanese yen.

The Japanese yen is often seen as a safe investment. This means that during periods of market stress, investors are more likely to put their money into the Japanese currency due to its supposed reliability and stability. Troubled times are likely to strengthen the value of the yen against other currencies considered riskier to invest in.

VaselineAugust 23, 2024

0 2 minutes read

Frequently Asked Questions about the Japanese Yen

Vaseline

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