EUR/JPY retreats further from multi-year peak, downside potential seems limited – by hareshmenghani EURJPY RiskAppetite BOJ ECB Currencies
n touched on Friday. Spot prices drop to the 158.25 region during the Asian session, down for the second straight day, though any meaningful corrective decline still seems elusive.
Speculations that the recent weakness in the Japanese Yen might prompt some jawboning from authorities or even lead to an intervention in the foreign exchange markets turn out to be a key factor acting as a headwind for the EUR/JPY cross. Apart from this, a generally weaker tone around the Asian equity markets benefits the safe-haven JPY and exerts some downward pressure on spot prices.
It is worth recalling that US President Joe Biden last week signed an executive order, which prohibits new US investment in China in sensitive technologies like computer chips and requires government notification in other tech sectors. Adding to this, Taiwan Vice President William Lai left on Saturday for a sensitive trip to the US, which China has condemned. Furthermore, Taiwanese officials fear that the trip could prompt more Chinese military activity around the democratically governed island.
On the geopolitical front, the Russian warship fired warning shots at a cargo ship in the southwestern Black Sea on Sunday and further tempers investors' appetite for riskier assets. That said, the Bank of Japan's dovish stance might keep a lid on any further gains for the JPY and helps limit the downside for the EUR/JPY cross, at least for the time being.
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