- The EUR/JPY advances around 163.80 in the European session on Wednesday, winning 0.10% in the day.
- The governor of the Boj said that he will not press for higher interest rates unless the economy is strong enough to support it.
- The inflation of the Eurozone falls below the target, supporting the bets for rate cuts.
The EUR/JPY crossroads gains land about 163.80 during the European session on Wednesday. The Japanese Yen (JPY) weakens in front of the euro (EUR) due to the caution comments of the governor of the Bank of Japan (Boj), Kazuo Ueda, and the best feeling of risk. The decision on the interest rate of the European Central Bank (ECB) will be at the Care Center on Thursday.
The governor of the Boj, Kazuo, said on Tuesday that uncertainties on external commercial policies and economic and pricing situations remain extremely high, adding that there is no pre -established plan for rates increases and that it will not press for higher interest rates unless the economy is strong enough to support it.
The cautious comments fed the expectation that the next increase in rates will not arrive soon, weighing on the JPY. According to a Reuters survey, most economists expect the BOJ to maintain stable rates until September, with a small majority forecasting an increase for the end of the year.
On the other hand, the inflation of the Eurozone softened below the object of the ECB in May. The data published by Eurostat on Tuesday showed that the inflation of the harmonized index of consumer prices (IAPC) was softened at 1.9% year -on -year in May from 2.2% in April. This figure was lower than the 2.0% expected. Meanwhile, the underlying inflation of the IAPC decreased to 2.3% year -on -year in May from 2.8% in the previous reading, below the 2.5% consensus.
This report has triggered expectations of greater relief from the ECB policy and could drag the currency shared down against JPY. The markets have completely discounted a reduction of 25 basic points (PBS) at the ECB deposit facility on Thursday. The reduction would carry the ease rate to 2.0%, its lowest level since January 2023.
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.
