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Euro holds near five-week highs versus yen despite BoJ tightening talk
EUR/JPY remained just below 186.00 after a five-week peak of 186.19, as traders weighed hawkish Bank of Japan signals against skepticism on faster tightening.
The euro pared earlier gains versus the Japanese yen on Wednesday after hawkish comments from Bank of Japan policymakers, though the EUR/JPY pair was still a few pips below the 186.00 level, with the five-week high near 186.19. FXStreet noted that the yen bounced early in Europe following a Bloomberg report that BoJ officials are open to raising interest rates faster than market consensus expects.
The impact of the hawkish tone appeared limited so far, with markets reportedly skeptical the BoJ will accelerate tightening because it could conflict with the Japanese government’s efforts to support growth. Traders also suggested the latest yen weakness could push Tokyo toward more pressure for BoJ independence, implying a need for policy action as inflation risks build again.
FXStreet also pointed to the expectation setting around upcoming BoJ communication, noting that only about 6 bps were priced for September. MUFG analysts said that a more hawkish July message could shift rate expectations, setting up a potential repricing of Japan rate risk.
In Europe, attention turns to the European Central Bank meeting scheduled for Thursday. While the ECB is expected to keep its benchmark rate unchanged, markets are looking for signals that could support additional rate hikes later, with energy price moves adding to inflation pressures that may help keep the euro supported.