Euro holds two-day gains against Yen, investors seek clarity on US-Japan future intervention plans
- The Euro trades firmly near 182.25 against the Japanese Yen ahead of the Eurozone Retail Sales data for June.
- Investors seek clarity regarding whether the US-Japan will intervene again.
- Market experts believe that the Yen also needs support from domestic improvements to support the recent strength.
The Euro (EUR) clings to two-day gains against the Japanese Yen (JPY) at around 182.25 during the European trading session on Thursday. The cross is expected to remain volatile, while investors seek clarity regarding whether the United States (US) and Japan will intervene again to prop up the Japanese currency.
Last week, Japan's Ministry of Finance (MoF) confirmed a US-Japan joint intervention to “counter excessive volatility and disorderly movements in the Japanese yen in recent months”.
Earlier this week, Japan Finance Minister (FM) Satsuki Katayama confirmed that Japan “won't hesitate to carry out more forex intervention with the US”.
Meanwhile, market experts believe that the intervention-driven strength in the Asia-Pacific currency won’t last long unless the US-Japan intervene again to support the Yen.
Yen rebound seen at risk despite historic USD/JPY intervention
Commerzbank notes that USD/JPY has already “surrendered part of its gains since last week's historic intervention,” and while the move was “impressive…in terms of scale,” the bank sees “good reasons to doubt that it will be enough to trigger a sustained appreciation of the Yen.” For the recent recovery to stick, Commerzbank argues that markets must be persuaded that “coordinated interventions by the BoJ and US authorities will remain on the table going forward.” In that context, the bank highlights comments from Treasury Secretary Scott Bessent, who has suggested that the US “would be willing to act again if necessary,” though investors will still need convincing that such support will be both credible and enduring.
On the Eurozone front, investors await Retail Sales data for June, which will be released at 09:00 GMT. Eurostat is expected to report that Retail Sales, a key measure of consumer spending, rose at a moderate pace of 0.1% Month-on-Month (MoM) against a 0.2% growth seen in May. On an annualized basis, the consumer spending measure growth is expected to have remained at 1%, slower than the previous reading of 1.6%.
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.