Key Moments
- EUR/JPY is trading around 181.70 after bouncing off a six-week low at 180.85.
- The cross is still down about 2.3% on the week as the Japanese Yen strengthens broadly.
- Expectations for ongoing Bank of Japan policy normalization and steady ECB rates are shaping moves in the pair.
EUR/JPY Attempts Stabilization After Sharp Slide
The Euro is trying to regain footing against the Japanese Yen on Thursday following three consecutive sessions of heavy selling. EUR/JPY has trimmed earlier intraday declines and is quoted near 181.70 at the time of writing, recovering from a six-week trough at 180.85. Despite the intraday recovery, the weekly performance remains weak, with the pair showing a 2.3% drop on the weekly chart.
Yen Strength Backed by Political and Policy Optimism
The Japanese Yen has emerged as one of the strongest performers this week, buoyed by a landslide election victory for Prime Minister Sanae Takaichi on Sunday. Market participants are concentrating on the potential economic benefits of Takaichi’s stimulus agenda, while paying less attention to the issue of how to fund those measures without adding further strain to an already elevated fiscal deficit.
At the same time, expectations that the Bank of Japan will continue to normalize its monetary stance are giving the Yen additional support. Although Japan’s consumer inflation has eased somewhat in recent data, it remains well above the BoJ’s target. Prospects of lower taxes combined with fiscal stimulus are seen as factors that could reinforce consumer demand. Against this backdrop, investors are increasingly pricing in the possibility of a BoJ rate hike, which could occur as early as March.
ECB Steady Policy Outlook Limits Euro Downside
On the Eurozone side, the European Central Bank left interest rates unchanged last week and signaled little appetite for imminent policy shifts, playing down concerns that a strong Euro could intensify disinflationary forces. Later on Thursday, comments from ECB Executive Board member Philip Lane and Bundesbank President Joachim Nagel are anticipated to echo that steady policy message, helping to prevent further pronounced losses in the Euro.
JPY Leads Weekly Performance Across Majors
The Japanese Yen has posted broad-based gains against major counterparts this week. The table below summarizes percentage changes of the JPY relative to key currencies. According to this performance snapshot, the Yen has shown particular strength versus the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.61% | -0.44% | -2.92% | -0.75% | -1.56% | -0.89% | -1.09% | |
| EUR | 0.61% | 0.18% | -2.40% | -0.14% | -0.96% | -0.28% | -0.48% | |
| GBP | 0.44% | -0.18% | -2.25% | -0.31% | -1.14% | -0.45% | -0.65% | |
| JPY | 2.92% | 2.40% | 2.25% | 2.28% | 1.45% | 2.16% | 1.83% | |
| CAD | 0.75% | 0.14% | 0.31% | -2.28% | -0.71% | -0.12% | -0.34% | |
| AUD | 1.56% | 0.96% | 1.14% | -1.45% | 0.71% | 0.69% | 0.48% | |
| NZD | 0.89% | 0.28% | 0.45% | -2.16% | 0.12% | -0.69% | -0.20% | |
| CHF | 1.09% | 0.48% | 0.65% | -1.83% | 0.34% | -0.48% | 0.20% |
The heat map reflects how major currencies have moved against one another over the week. The base currency is selected from the left-hand column and the quote currency from the top row. For instance, choosing the Japanese Yen on the left and following the row to the US Dollar column gives the percentage move for JPY (base)/USD (quote).
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