Euro Steadies vs Yen as ECB Hike Bets Clash with BoJ Tightening Hopes

The Euro has steadied against the Japanese Yen as expectations of another interest rate hike from the European Central Bank (ECB) in September clash with hopes for tighter monetary policy from the Bank of Japan (BoJ). The EUR/JPY pair is trading around 183.80, little changed on the day.

A Reuters poll conducted from August 10 to 13 shows that 57 out of 69 economists expect the ECB to raise its deposit rate by 25 basis points (bps) to 2.5% at its September meeting, with around 80% expecting the rate to end the year at 2.5%. The BoJ, on the other hand, is expected to tighten policy in response to concerns over yen weakness driving up prices and the government's desire to strengthen the impact of recent US-Japan currency intervention.

Analysts at MUFG note that expectations build for a faster pace of BoJ policy tightening, with Prime Minister Takaichi's government supportive of a near-term BoJ hike. The Bloomberg report suggests that the BoJ's fears over yen weakness driving up prices and the government's desire to strengthen the impact of recent US-Japan currency intervention are aligning policymakers on the need for a near-term move.