EUR/JPY weakened to around 174.20 in Thursday’s Asian session as fears of foreign exchange intervention from Japanese authorities supported the Japanese Yen and dragged the cross lower. The outcome of the second round vote of the French parliamentary elections on Sunday may add volatility to the Euro.
The EUR/JPY cross traded weaker at 174.20, ending a six-day winning streak during the Asian session on Thursday. The fear of FX intervention from Japanese authorities boosted the Japanese Yen. Later in the day, German Factory Orders for May and ECB Monetary Policy Meeting Accounts will be released.
Speculation of FX intervention from Japanese authorities is providing support to the JPY and limiting the cross’s upside. The weakening of the Japanese Yen is putting pressure on consumer confidence, prompting concerns of imminent intervention. Data released on Wednesday showed a drop in Japan’s Services PMI for June, which could undermine the JPY and benefit the cross.
On the Euro front, the far-right’s chances of winning the French election diminished as centrist and left-wing candidates joined forces to prevent Marine Le Pen’s National Rally from seizing power. The upcoming French parliamentary elections on Sunday could introduce volatility to the Euro.
The Japanese Yen is influenced by various factors such as the performance of the Japanese economy, Bank of Japan’s policy, bond yield differentials, and risk sentiment among traders. The BoJ’s currency control interventions aim to lower the value of the Yen, but political concerns limit their frequency. The BoJ’s ultra-loose monetary policy has caused the Yen to depreciate against other currencies, particularly due to policy divergence with other central banks. The Yen is also considered a safe-haven investment, strengthening during times of market stress.