16/06/26

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The Japanese Yen weakened during the Asian session after the Bank of Japan raised its policy rate by 25 basis points to 1%, a move that had been widely anticipated by markets. The currency briefly recovered some ground before giving up part of its early advance, with EUR/JPY rebounding from an intraday low near 185 to trade around 186. The pair remained slightly above Monday’s closing level as investors assessed the implications of the central bank’s latest tightening step.

The rate increase came amid concerns that inflationary pressures remain elevated, supported in part by higher energy costs linked to tensions in the Middle East. Attention now turns to the Bank of Japan’s next policy signals, which are expected to be delivered by Deputy Governor Shinichi Uchida while Governor Kazuo Ueda remains hospitalized. Market participants are looking for guidance on whether the central bank is prepared to continue normalizing policy in the months ahead.

The euro also found support against several major counterparts as expectations grew that the European Central Bank may need to maintain a restrictive stance for longer. That view persisted even after confirmation of a peace arrangement between the United States and Iran and the reopening of the Strait of Hormuz, a key route for a large share of global energy shipments.

Comments from ECB policymakers reinforced the hawkish tone. Joachim Nagel, president of the Deutsche Bundesbank, said inflation relief is unlikely to arrive soon and that it may take months for oil supply conditions to normalize. He also pointed to the risk of second-round inflation effects and left open the possibility of further action at the July meeting. Martins Kazaks separately indicated that the ECB may need to tighten again if necessary, while warning that inflation risks remain tilted to the upside.

Later in the day, market focus will shift to Germany’s June ZEW survey, a closely watched gauge of investor sentiment and economic expectations. The data may help shape views on the outlook for the euro area’s largest economy and, by extension, the ECB’s policy path.