EUR/JPY lingers below 178-month high as intervention chances mount

Key points

The Japanese Yen remained pressured near lows unseen since September 2008 against the Euro on Monday, as market players were on watch whether Japan would intervene in the Forex market.

Against the US Dollar, the Japanese currency was trading at levels close to last Friday’s eight-month trough of 145.071.

Yen losses were restrained after Japan’s Finance Minister Shunichi Suzuki said last week that Japanese authorities would take appropriate measures to respond to excessive Yen depreciation.

“Intervention is best conceived of as an escalation ladder,” Marc Chandler, chief market strategist at Bannockburn Forex, was quoted as saying by Reuters.

“Among the highest rungs is the coordinated intervention… The low rungs on the escalation ladder are different types of verbal intervention.”

Japanese monetary authorities intervened in the Forex market buying Yen in September last year, the first such move since 1998, after a decision by Bank of Japan to keep its ultra-easy policy stance drove the USD/JPY pair as high as 145.

Another intervention occurred in October after USD/JPY scaled a 32-year peak of 151.94.

Meanwhile, Japan’s business sentiment improved in Q2 as factory output and consumption rose after the removal of pandemic-related curbs and as raw material costs peaked.

“The tankan confirmed our view that Japan’s economy is on track for a moderate recovery,” Atsushi Takeda, chief economist at Itochu Economic Research Institute, said.

“While input prices have declined, output prices continue to rise in a sign companies are being able to pass on costs. That’s a good sign for the BOJ’s inflation outlook and may prod the bank to tweak its yield control policy later this year.”

As of 9:31 GMT on Monday EUR/JPY was inching up 0.06% to trade at 157.494. Last week the minor Forex pair went up as high as 157.998. The latter has been the pair’s strongest level since September 3rd 2008 (158.033).