GBP/JPY falls from multi-year highs to near 210.30 as Japan warns of intervention
- GBP/JPY corrects to near 210.30 as the Japanese Yen rebounds on hopes of Japan’s intervention.
- Japan’s Finance Minister Katayama said that officials have a free hand in dealing with one-sided speculative moves in the Yen.
- Last week, the BoE cut interest rates by 25 bps, while the BoJ raised them by the same size.
The GBP/JPY pair retraces to near 210.30 on Tuesday from its multi-year high of 211.60 posted on Monday. The rally in the cross hits pause as the Japanese Yen (JPY) discovers temporary support, following comments from Japan’s Finance Minister Satsuki Katayama that the government could intervene against excessive one-sided moves.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.18% | -0.23% | -0.62% | -0.10% | -0.16% | -0.33% | -0.27% | |
| EUR | 0.18% | -0.07% | -0.46% | 0.07% | 0.00% | -0.16% | -0.10% | |
| GBP | 0.23% | 0.07% | -0.40% | 0.14% | 0.09% | -0.09% | -0.03% | |
| JPY | 0.62% | 0.46% | 0.40% | 0.54% | 0.49% | 0.28% | 0.39% | |
| CAD | 0.10% | -0.07% | -0.14% | -0.54% | -0.05% | -0.24% | -0.15% | |
| AUD | 0.16% | -0.00% | -0.09% | -0.49% | 0.05% | -0.17% | -0.11% | |
| NZD | 0.33% | 0.16% | 0.09% | -0.28% | 0.24% | 0.17% | 0.06% | |
| CHF | 0.27% | 0.10% | 0.03% | -0.39% | 0.15% | 0.11% | -0.06% |
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).
“Japan has a free hand in dealing with excessive moves in the Yen,” Katayama said. She added, “Will take appropriate action against excessive moves.”
Though Japan’s stealth intervention is expected to support the Japanese Yen to regain ground, the recovery move will unlikely last long as investors remain cautious over the Bank of Japan’s (BoJ) monetary policy outlook, the key reason behind the Yen’s downfall.
Last week, the BoJ raised interest rates by 25 basis points (bps) to 0.75%, as expected, and kept the door open for further monetary tightening. However, market participants believe that BoJ’s intentions are contrary to the government’s fiscal goals, which could limit the expectations of further interest rate hikes in the near term.
Meanwhile, the Pound Sterling (GBP) exhibits a mixed performance against its peers, with investors remaining on the sidelines in a holiday-elongated week. Going forward, the major trigger for the Pound Sterling will be market expectations about whether the Bank of England (BoE) will cut interest rates again in early 2026.
Last week, the BoE reduced interest rates by 25 bps to 3.75% with a tight vote and guided that the monetary policy path will remain gradually downwards.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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