Euro rises against Japanese Yen as latter underperforms across board
- EUR/JPY rises to near 180.78 amid weakness in the Japanese Yen.
- Financial markets start expecting Japan to intervene soon.
- Traders reassess ECB interest rate hike expectations due to recent correction in oil prices.
The Euro (EUR) is 0.2% at around 180.78 against the Japanese Yen (JPY) during the European trading session on Tuesday. The cross gains as the Japanese currency underperforms its currency peers. The currency has been under pressure since the Bank of Japan’s (BoJ) monetary policy announcement last week.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.03% | 0.22% | 0.00% | 0.12% | -0.33% | -0.05% | |
| EUR | -0.07% | -0.04% | 0.18% | -0.05% | 0.06% | -0.37% | -0.10% | |
| GBP | -0.03% | 0.04% | 0.19% | -0.04% | 0.09% | -0.33% | -0.06% | |
| JPY | -0.22% | -0.18% | -0.19% | -0.22% | -0.10% | -0.54% | -0.25% | |
| CAD | -0.00% | 0.05% | 0.04% | 0.22% | 0.13% | -0.30% | -0.02% | |
| AUD | -0.12% | -0.06% | -0.09% | 0.10% | -0.13% | -0.43% | -0.15% | |
| NZD | 0.33% | 0.37% | 0.33% | 0.54% | 0.30% | 0.43% | 0.29% | |
| CHF | 0.05% | 0.10% | 0.06% | 0.25% | 0.02% | 0.15% | -0.29% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
In the policy meeting, the BoJ decided to hike interest rates by 25 basis points (bps) to 1.25%, the highest figure seen in 31 years. Two BoJ board members: Toichiro Asada and Ayano Sato opposed the hike decision. The Japanese central bank kept the door open for further interest rate hikes, warning, “Inflation might exceed the central bank’s 2% target.” The central bank added, “Recent Yen depreciation likely to push prices higher.”
Meanwhile, a significant depreciation in the Japanese Yen in past few days has prompted fears of Japan’s intervention to support the currency. Analysts at MUFG note that "the BoJ had conducted a rate check during the New York trading session,” sending “a clear signal that they are prepared to intervene again if the yen continues to weaken.” MUFG warns that this move came “ahead of the 3-day holiday period where liquidity for USD/JPY is likely to be lower.”
On the Euro front, traders have slightly trimmed hawkish European Central Bank (ECB) expectations due to a sharp correction in oil prices. The WTI Oil price has retreated below $92 from the recent high of $102.11 on hopes of an increase in the supply of energy products from Saudi Arabia.
Inflation repricing tempers expectations for aggressive ECB tightening
Strategists at Deutsche Bank highlight that the recent easing in inflation concerns has shifted the policy outlook in a more constructive direction. They note that “for now the momentum is on the more positive side though and with inflation fears subsiding again, that meant investors dialled back the likelihood of rapid rate hikes, even if plenty are still priced in for the month ahead.” In rates markets, Deutsche Bank points out that “markets are still fully pricing in another ECB hike by year-end, but the probability of a second hike this year fell from 52% on Friday to 40% by the close,” underscoring a more measured trajectory being embedded into expectations.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential 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 directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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