Investors price in a 57% chance of a 25 basis point BoJ rate increase in September, lifting the JPY and weighing on the EUR cross.
The Euro slid 0.22% to 185.45 against the Japanese Yen in early European trading, pressured by rising expectations of a Bank of Japan rate hike. Markets now assign a 57% probability to a 25 basis point increase at the September meeting, up sharply from 5% in July.
A Reuters poll and remarks from former BoJ board member Seiji Adachi fueled speculation, with Adachi suggesting a potential follow-up hike in January. The JPY outperformed peers, including the New Zealand Dollar, amid the shift in policy outlook.
The cross remains sensitive to BoJ guidance, with traders monitoring upcoming data for further clues on the timing and pace of tightening.