Japanese officials signal readiness to intervene in forex markets, prompting a retreat in the EUR/JPY pair after a five-day rally.
The Euro retreated against the Japanese Yen on Friday, breaking a five-day winning streak as Tokyo issued warnings over speculative moves in the currency. The EUR/JPY pair dropped to 185.00 after peaking near 185.65 earlier in the session, though it remains on track for a fourth consecutive weekly gain.
Japanese Cabinet Secretary Minor Kihara stated the government is “extremely concerned” about speculative Yen movements, reinforcing market expectations of potential intervention. While Kihara avoided commenting on specific exchange levels, he affirmed Tokyo’s readiness to take “appropriate action” on forex.
The Yen’s weakness has been driven by high oil prices and low Japanese Government Bond yields, widening yield differentials that fuel carry trades. Recent data showed Tokyo’s Consumer Price Index easing in May, but strong industrial production and a declining unemployment rate keep hopes alive for a Bank of Japan rate hike.