Euro tumbles against Japanese Yen amid fears of another US-Japan joint intervention

The Euro (EUR) is sharply down at around 184.66 against the Japanese Yen (JPY) during the European trading session on Wednesday. The cross faces intense selling pressure as the Japanese currency outperforms on fresh expectations that the United States (US) and Japan will jointly intervene again.

In late July, Japan’s Ministry of Finance (MoF) confirmed US-Japan joint intervention to counter excessive volatility.

Fresh US-Japan intervention prospects have been prompted by comments from Japan Finance Minister (FM) Satsuki Katayama that she met with US Treasury Secretary Scott Bessent and agreed that “orderly yen movements are critical for global market stability”.

On the monetary policy front, financial markets seem confident that the Bank of Japan (BoJ) will raise interest rates in the policy meeting this month. Analysts at MUFG highlight that markets are already assigning a "92% chance of a September rate hike by BoJ”.

Strategists also believe that the focus for investors is shifting beyond the immediate decision. They argue that "what matters more may not just be the September meeting but also communication about the whole path of rate hikes in upcoming BoJ meetings," underscoring that guidance on the sequencing and pace of future tightening is likely to be a key driver of Yen and JGB sentiment.

Meanwhile, the Euro trades marginally lower even as hot Eurozone inflation data for August has prompted expectations of European Central Bank (ECB) interest rate hike this month.

Commerzbank argues that “the renewed surge in the inflation rate above 3% is likely to ensure that the ECB raises interest rates in September”. However, the bank acknowledged that “overall, the data point to some moderation in economic and labour market momentum”.