EUR/JPY Holds Strong Near 161.85 in Early Asian Trading
- Japan’s PM Ishiba’s Comments Weigh on Japanese Yen
- Market Anticipates ECB Rate Cut in October Meeting
In the early European session on Thursday, the EUR/JPY pair continues to trade around 161.85 as the Japanese Yen (JPY) weakens following remarks from Japan’s Prime Minister Shigeru Ishiba. Ishiba’s dovish stance on interest rates has put downward pressure on the Japanese currency.
PM Ishiba’s Statements and Market Reaction
After a meeting with Bank of Japan (BoJ) Governor Kazuo Ueda, Prime Minister Ishiba stated that Japan is not currently in a position to consider raising interest rates. This declaration has led traders to reevaluate their expectations of a near-term rate hike, resulting in a decline in bets on such a move.
Furthermore, BoJ Governor Ueda emphasized the need for cautiousness in future monetary policy decisions. Board member Asahi Noguchi echoed this sentiment, suggesting that the central bank should maintain its accommodative stance for the time being. Traders are now assigning less than a 50% probability of a 10 basis points (bps) rate hike by the BoJ before the end of the year.
ECB Rate Cut Speculation
On the other hand, concerns about a potential interest rate cut by the European Central Bank (ECB) in October are weighing on the Euro (EUR) and could limit gains in the EUR/JPY pair. Recent data showing Eurozone inflation below the ECB’s target of 2% has fueled expectations of a rate reduction. ECB policymaker Martins Kazaks has indicated a strong case for a rate cut at the upcoming meeting, citing concerns about the Eurozone economy reaching a critical juncture.
Japanese Yen FAQs
Factors Influencing the Japanese Yen
The value of the Japanese Yen (JPY) is influenced by various factors, including:
- The performance of the Japanese economy
- Bank of Japan’s monetary policy decisions
- Differential between Japanese and US bond yields
- Risk sentiment among traders
BoJ’s Currency Control and Policy Impact
The Bank of Japan (BoJ) plays a crucial role in currency control, with its policy decisions impacting the value of the Yen. The BoJ’s interventions in the currency market, aimed at managing the Yen’s value, have been sporadic due to political considerations. Changes in BoJ’s monetary policy have historically affected the Yen’s value against major currency peers.
Policy Divergence and Safe-Haven Status
Over the past decade, the BoJ’s ultra-loose monetary policy has led to policy divergence with other central banks, particularly the US Federal Reserve. This divergence has influenced the USD/JPY exchange rate. Additionally, the Japanese Yen is often viewed as a safe-haven investment during times of market volatility, strengthening its value in turbulent conditions.