- The EUR/JPY weakens about 161.65 in the Asian session on Tuesday, losing 0.33% in the day.
- The increase in the demand for sure refuge supports the Japanese yen.
- The preliminary reading of the PMI of April Hcob of the Eurozone, Germany, will be the center of attention on Wednesday.
The EUR/JPY crossing attracts some sellers around 161,65 during the first bars of the European session on Tuesday. The Japanese Yen (JPY) is strengthened in front of the euro (EUR) amid the concerns about the tariffs of the US president, Donald Trump, and the growing commercial war between the US and China.
The persistent uncertainties related to trade caused by Trump and his new attack on the president of the Federal Reserve (Fed), Jerome Powell, shook the markets. This, in turn, drives safe refuge flows, benefiting JPY in the short term. The Economic Advisor of the White House, Kevin Hassett, said Friday that Trump and his administration were studying if they could fire Powell from the Fed.
In addition, the growing bets that the Bank of Japan (BOJ) will continue to increase interest rates could contribute to the rise of the JPY and act as a wind against the Eur/JPY. The governor of the Boj, Kazuo Ueda, said last week that the real interest rates of Japan are still very low and that the Boj is expected to continue increasing interest rates if the economy and prices move in line with the projections. This opinion was reaffirmed by the member of the Boj Council, Junko Nagakawa.
In the front of the euro, the moderate position of the European Central Bank (ECB) could weigh on the shared currency. The ECB decided to cut its main interest rate in a percentage quarter to 2.25% at its April meeting last week. During the press conference, the president of the ECB, Christine Lagarde, said that US tariffs on EU assets, which had increased from an average of 3% to 13%, were already harming the prospects of the European economy.
Investors will keep an eye on the preliminary reading of the purchase managers index (PMI) of HCOB of the Eurozone and Germany for April, which will be published later on Wednesday. If the reports show a stronger result than expected, this could help limit EUR losses.
And in Japanese faqs
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
