The euro slipped to 184.10 against the Japanese yen on Monday, down 0.32% as the yen extends its rally driven by mounting expectations of further Bank of Japan policy tightening. The Japanese currency is gaining ground amid rising bets that the BoJ will continue normalizing its ultra-loose monetary stance with additional interest rate hikes. Japanese authorities have reinforced yen strength by issuing fresh warnings about currency weakness, signaling their readiness to intervene if necessary.
The move reflects a shifting landscape for yen crosses as Japan’s monetary policy diverges from other major economies. Traders are reassessing positioning in carry trades that have long profited from Japan’s rock-bottom rates. The combination of hawkish BoJ sentiment and official jawboning from Tokyo has created a supportive environment for the yen across the board, putting pressure on EUR/JPY and other yen pairs.
FXnCO Insight
Traders should monitor BoJ communications closely and consider reducing exposure to long yen-cross positions as the risk of further Japanese rate hikes could trigger additional unwinding of carry trades.
Source: FXStreet