- The EUR/JPY gains temporary ground about 165.00 after a strong massive sale earlier in the day.
- The tensions between Iran and Israel have increased the demand for safe refuge of the Japanese yen.
- Investors will pay special attention to the BOJ monetary policy announcement on Tuesday.
The EUR/JPY torque finds temporary support about 165.00 during the last Asian hours of Friday after a strong mass sale earlier in the day. The torque fell as tensions in the Middle East region increased the demand for safe refuge assets such as Japanese Yen (JPY).
Early on Friday, Israel launched a series of attacks on military bases and nuclear facilities in the northeast of the capital of Iran, Tehran, with the aim of restricting Iran’s economy so that it does not build nuclear eyes. The Israeli prime minister, Benjamin Netanyahu, has declared that the war will take “many days” and that his army is preparing for any retaliation of Iran.
Meanwhile, the president of the United States (USA), Donald Trump, has declared during the Asian hours that they will “cannot have a nuclear bomb”, while reiterating their hopes of a peaceful ending to tensions.
On the domestic front, investors expect the announcement of monetary policy of the Bank of Japan (BOJ) on Tuesday. The BOJ is expected to maintain stable interest rates at 0.5% since officials have declared that US tariff policy has generated concerns about short -term growth. However, they trust that underlying inflation is on its way to returning to the goal of 2%.
Meanwhile, the Euro (EUR) exhibits mixed yield on Friday, since the vice president of the European Central Bank (ECB), Luis de Guindos, has expressed concerns about economic growth in the midst of the commercial war risk. “The economy has proven to be resistant, but faces a series of risks, such as tariffs, which could stop growth,” Guindos said Thursday.
In the front of monetary policy, ECB officials have indicated a pause in the monetary flexibility cycle. The BCE council member, Isabel Schnabel, said Thursday that the monetary flexibility cycle “is coming to an end” since “medium -term inflation is stabilizing around the target,” Bloomberg said.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
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.
