The EUR/JPY currency pair gained for a third straight trading day on Thursday ahead of the outcome of the European Central Bank’s policy meeting.
The ECB is largely expected to raise its main refinancing operations rate by 25 basis points to 2.40% at its June 11th meeting.
And, the ECB deposit facility rate is expected to be raised to 2.25%.
This move would make the central bank the first among its major peers to tighten policy in reaction to a surge in energy prices linked to the conflict in the Middle East.
ECB Executive Board member Isabel Schnabel had said that the central bank should move ahead with an interest rate hike in June, even if US peace talks with Iran are successful. She highlighted that the conflict had lasted significantly longer than anticipated and that elevated energy prices were increasingly affecting the wider economy.
And, ECB policy maker Francois Villeroy de Galhau again underscored that the central bank “will do what is necessary” to ensure inflation remains in line with its target.
Any signals of a more aggressive tightening path or firm anti-inflation stance from ECB officials could offer additional near-term support to the Euro.
At the same time, market players were on watch for a potential foreign-exchange intervention by Japanese authorities.
Finance Minister Satsuki Katayama said earlier this week the government was closely monitoring developments in the currency market. She underscored that Japan’s position had not shifted regarding its readiness to take decisive action if required to safeguard market stability.
The Bank of Japan is widely expected to raise interest rates next week as policy makers contend with sharply rising energy costs tied to the conflict in the Middle East.
Tensions intensified after Iran’s Islamic Revolutionary Guard Corps declared an immediate and complete closure of the Strait of Hormuz, stating that any commercial or oil vessels attempting to pass through the strait would be targeted.
The EUR/JPY currency pair was last up 0.07% on the day to trade at 185.22.
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