EUR/JPY holds near multi-year highs at 171.50, fears of Japanese intervention intensify

• EUR/JPY is trading near multi-year highs above 171.00.
• Fears intensify of Japanese intervention to cushion the Japanese Yen.
• The ECB is expected to deliver further rate cuts soon.

He EUR/JPY trading near multi-year highs around 171.50 in the American session on Wednesday. The cross is expected to face selling pressure as the Japanese Yen could gain significantly with Japan intervening against excessive volatility movements in the forex market.

Fears of an intervention by Japan to provide a cushion to the weak Yen have deepened as the currency has fallen to the lowest levels since 1986 at 160.39 against the US Dollar (USD).

The Japanese Yen has remained under pressure despite growing speculation that the Bank of Japan (BoJ) will raise interest rates again soon. Expectations for further policy tightening have improved as the weak Yen is resulting in higher inflation by making exports competitive in global markets and increasing import costs. BoJ minutes from the last meeting showed one member argued for an increase “without too much delay” to help reduce inflation, Reuters reported.

Meanwhile, the Euro is also under pressure due to growing expectations that the European Central Bank (ECB) will deliver subsequent rate cuts. The likelihood of further rate cuts by the ECB has been driven by the deteriorating economic outlook for the Eurozone’s largest economy.

German IFO data showing market sentiment on the current position of the economy and future prospects indicated a gloomy outlook. The IFO Business Climate, an early indicator of current business conditions and expectations in Germany, surprisingly fell to 88.6 for June.