EUR/JPY saw a rebound on Friday, gaining over 150 pips from a recent low. This increase was driven by renewed selling pressure on the Japanese Yen. However, concerns about potential intervention by Japanese authorities and political uncertainty in France may limit significant gains for the currency pair.
The EUR/JPY pair bounced back from a two-week low during the Asian trading session and surpassed the 173.00 mark. The sharp decline from the recent high of 175.40-175.45 was halted by fresh selling of the Japanese Yen.
Despite initial speculation of Japanese intervention in the foreign exchange market, the lack of concrete evidence led to a quick fade in market reaction. The strong bullish sentiment in equity markets also weakened the safe-haven appeal of the JPY, supporting the EUR/JPY pair.
However, uncertainties surrounding the formation of France’s new government and expectations of interest rate hikes by the Bank of Japan could prevent a significant appreciation of the EUR/JPY pair. Japanese officials have expressed readiness to take measures to ensure stable currency movements, further adding to the cautious outlook for bearish traders.
As the BoJ maintains its ultra-loose monetary policy, the policy divergence with other central banks, particularly the US Federal Reserve, continues to widen. This divergence favors the US Dollar over the Japanese Yen, contributing to the currency pair’s fluctuations.
Overall, while the Japanese Yen is considered a safe-haven asset, market turbulence may strengthen its value against riskier currencies in times of uncertainty. Investors should closely monitor developments in both the Japanese and European economies to assess the future direction of the EUR/JPY pair.