The euro slipped against the Japanese yen in early European trading on Thursday, hovering near ¥187.50 and close to weekly lows, as rising expectations of a Bank of Japan (BoJ) rate hike and stronger intervention warnings from Tokyo supported the Japanese currency.
Policy signals and intervention risk
Japan’s Finance Minister Katayama said Tokyo had urged G7 partners to monitor currency moves closely, a remark that intensified speculation about possible intervention in the foreign exchange market.
After talks with U.S. Treasury Secretary Scott Bessent, Katayama reiterated that Japanese authorities are prepared to take “bold” action against excessive moves in the yen. Officials have communicated this stance across G7 capitals, underlining a coordinated awareness of currency volatility and making the prospect of direct market action more concrete.
These signals come as the yen, often used as a safe haven in times of stress, draws support from both policy expectations and geopolitical tensions tied to the conflict in Iran.
Rising rate expectations at Bank of Japan
The yen advanced as traders reassessed the outlook for BoJ policy tightening. A Reuters survey showed roughly two-thirds of economists expect the central bank to raise its key rate to 1.00% by the end of June.
Opinions remain split over timing, with some expecting a move as early as the April 28 meeting, and others looking to June. Former BoJ chief economist Toshitaka Sekine has argued that persistent inflation, driven partly by higher energy prices linked to the Iran conflict, could justify an April hike.
At the same time, the same geopolitical shock is creating sharp market volatility and a weaker global growth outlook, a combination that could persuade policymakers to delay any adjustment until later in the second quarter.
Yield surge and inflation pressures
Japan’s 10‑year government bond yield has climbed to about 2.43%, the highest level in decades, reflecting expectations of further policy normalization and sustained inflation pressures.
The conflict in the Middle East is disrupting global energy supplies, which the International Energy Agency has described as the “largest supply disruption” in history. For energy‑dependent Japan, this shock is feeding domestic inflation and reinforcing the case for tighter policy, even as it raises downside risks for growth.
Yen’s safe-haven support
The yen, one of the most traded global currencies, is particularly sensitive to shifts in bond yield differentials and changes in perceived market safety.
Years of ultra‑loose BoJ policy had widened yield gaps with the United States and Europe, pressuring the yen. The recent move toward gradual tightening has helped narrow those gaps and restore some support for the currency.
In periods of market stress, the yen typically benefits from its long-standing role as a safe haven. The latest bout of geopolitical uncertainty has reinforced this pattern, pushing traders toward the yen and leaving the euro under moderate pressure.
Technical outlook for euro/yen
From a chart perspective, the euro–yen pair remains above its 100‑day exponential moving average (around ¥182.75), preserving a broadly upward trend despite the latest pullback.
The 14‑day relative strength index is near 69, just below the overbought threshold of 70. This suggests that while upward momentum is still firm, the rally may be close to levels that have previously preceded corrections or consolidation.
Key resistance levels
- ¥187.95, near the upper Bollinger Band
- ¥188.50, as the next potential upside barrier
Key support levels
- ¥186.20, the April 13 low and first key floor
- ¥185.00, as the next downside level
- Around ¥182.75, near the 100‑day EMA, offering deeper technical support
A clear break above ¥187.95 would open the door to further gains toward ¥188.50, while a sustained drop below ¥186.20 could signal the start of a short‑term reversal.
Focus on Tokyo communication and BoJ meeting
With intervention risk elevated, traders are closely watching official comments from Tokyo for any shift in tone or language that might precede direct action in the market.
The BoJ’s late‑April meeting is emerging as a critical event. Decisions on rates and guidance are likely to be shaped by how energy prices and geopolitical tensions evolve in the coming weeks.
Until then, the euro–yen pair is expected to remain highly sensitive both to policy headlines and to moves around the outlined technical levels.
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