Yen Falls Slightly After BoJ Rate Hike
The Japanese yen pared some of its initial gains against major currencies after the Bank of Japan raised interest rates as expected. The BoJ raised rates by 25 bps to 1%, the highest level since 1995, in a decision made in the absence of Governor Kazuo Ueda, who is hospitalized.
The yen's reaction was muted as the hike was already expected by the market. EUR/JPY briefly fell to 185.45, then rebounded to near 185.65, although it remains about 0.12% higher than Monday's close. This movement suggests some market participants are taking profits following the BoJ's decision.
Fundamentally, the BoJ's interest rate hike supports Japan's policy normalization and could help the yen in the medium term. However, its impact on the JPY could be limited if the market perceives the BoJ will not aggressively raise interest rates further, especially amid global uncertainty and divergent policy directions from other central banks.
For the euro, support still comes from expectations that the ECB is not finished tightening policy. Several ECB officials warned that inflation risks remain upward, particularly as energy prices previously weighed on the regional economy. This prevented the EUR/JPY from falling too far despite the Bank of Japan's interest rate hike.
The market's next focus will be on further signals from the Bank of Japan, Ueda's health, the direction of Japanese yields, and comments from ECB officials regarding inflation and interest rates. If the Bank of Japan signals further increases, the yen could regain support. However, if the ECB remains hawkish, downward pressure on the EUR/JPY could be contained. (asd)
Source: Newsmaker.id
