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- EUR/JPY may fall as the Japanese Yen gains amid intervention speculation by Japanese authorities.
- RaboResearch flags Yen volatility, citing lower 10-year yields and rising intervention risks amid inflation and trade deficits.
- ECB’s Martin Kocher warned that further Euro strength could prompt the central bank to resume rate cuts.
EUR/JPY has recovered its recent losses from the previous session, trading around 183.40 during the Asian hours on Thursday. The upside of the currency cross could be restrained as the Japanese Yen (JPY) finds support from speculation that Japanese authorities may intervene to curb further currency weakness, alongside the Bank of Japan’s (BoJ) hawkish policy stance.
Rabobank’s RaboResearch reviews the Japanese Yen’s recent moves, pointing to a pullback in 10-year yields and the growing risk of official intervention as inflation and trade deficits widen. The note underscores the fragile state of Japan’s economy and flags potential spillovers to US Treasuries, arguing that Japan may ultimately require external support to manage its mounting financial pressures.
Bank of Japan (BoJ) board members outlined their views on the policy outlook in the December Meeting Minutes released on Wednesday. Several members noted that real interest rates would remain deeply negative even if the BoJ were to raise the policy rate to 0.75%. Members broadly agreed that the BoJ is likely to continue tightening if its economic and price forecasts are realized. Most also stressed that the BoJ should avoid a preset path for rate hikes and instead assess economic conditions, inflation, and financial markets at each meeting before making decisions.
However, the JPY may come under pressure as the Greenback could strengthen after US Treasury Secretary Scott Bessent dismissed speculation that the US would intervene in currency markets to sell dollars against the Yen.
European Central Bank (ECB) policymaker Martin Kocher cautioned that additional Euro (EUR) appreciation could lead the central bank to restart interest-rate cuts. In response, markets slightly raised expectations for a summer move, with the implied probability of a July cut climbing to around 25% from about 15%. The ECB meets next week to set policy and is widely expected to leave rates unchanged.
