- EUR/JPY eyes above 166.00 amid weakness in the Japanese Yen.
- The BoJ seems incapable of hiking interest rates further.
- Investors await Eurozone macroeconomic data and the BoJ policy announcement.
The EUR/JPY pair aims to extend its rally above the immediate resistance of 166.00 in Tuesday’s North American. The cross remains firm as the Japanese Yen (JPY) weakens across the forex domain amid expectations that the Bank of Japan (BoJ) is incapable of hiking interest rates further in the remaining year.
Market speculation for the BoJ to leave interest rates unchanged at their current levels by the year-end has strengthened after the outcome of Japan elections in which the ruling party failed to gain a majority. This has raised uncertainty over economic growth stability.
Meanwhile, investors await the BoJ’s interest rate decision on Thursday in which the central bank is expected to leave its key borrowing rates unchanged at 0.25%. Therefore, investors will keenly focus on the interest rate guidance.
In the Eurozone region, investors await a string of macroeconomic data such as preliminary Gross Domestic Product (GDP) and the Harmonized Index of Consumer Prices (HICP) data for October, which will be published on Wednesday and Thursday, respectively. The economic data will significantly influence market expectations for the European Central Bank’s (ECB) likely size for interest rate cuts in its last monetary policy meeting of this year in December.
A few ECB officials are worried about the risks of price pressures remaining below the bank’s target of 2% for a longer period due to growing downside risks to economic growth.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD flat lines around the 0.6565 area after Australian Retail Sales
AUD/USD moves little following the release of softer Australian Retail Sales figures and languishes near its lowest level since August 8 touched on Wednesday. A slight deterioration in the global risk sentiment, along with the underlying bullish sentiment surrounding the USD, offsets hawkish RBA expectations and acts as a headwind for the Aussie.
USD/JPY extends the range play below multi-month top ahead of BoJ
USD/JPY remains below a three-month high touched earlier this week as traders seem reluctant ahead of the crucial BoJ policy decision later this Thursday. The cautious market mood underpins the safe-haven JPY, which seemed unaffected by mixed Japanese economic data and exerts some pressure on the pair amid subdued USD price action.
Gold price remains close to record high amid US election jitters, geopolitical risks
Gold price edges lower during the Asian session on Thursday amid a further rise in the US Treasury bond yields. Any meaningful corrective decline still seems elusive in the wake of the US political uncertainty and Middle East tensions, which might continue to benefit the safe-haven precious metal.
Bank of Japan set to hold interest rates steady as rising inflation points to year-end hike
The Bank of Japan is widely expected to maintain its short-term interest rate at around 0.25%, following the conclusion of its two-day monetary policy review on Thursday. The BoJ decision will be accompanied by the bank’s quarterly outlook report, which will be released at around 3:00 GMT.
German economy surprises in the third quarter
The German economy avoided a technical recession in the third quarter, showing unexpected growth. However, this does not change the fact that the economy remains stuck in stagnation.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.