The cross rises 0.15% as Japan’s low rates fuel carry trades, widening the gap with the ECB’s 2.25% deposit rate.
The EUR/JPY pair rebounds to 185.75, up 0.15% on Tuesday, halting a three-day decline as traders buy dips. The Japanese Yen’s underperformance persists due to a 125 basis point rate gap with the Eurozone, sustaining carry trade demand.
Japan’s short-term policy rate stands at 1.00%, its highest since 1995, while the ECB’s deposit rate remains at 2.25%. The differential encourages traders to borrow JPY to fund purchases of higher-yielding EUR, though intervention risks cap further gains.
Markets remain cautious ahead of Thursday’s ECB meeting, which may influence the pair’s near-term direction. Speculation over potential JPY support measures also tempers bullish momentum.