Euro gains strongly against Japanese Yen as latter underperforms across board

The Euro (EUR) is higher by 0.36% to near 185.25 against the Japanese Yen (JPY) during the European trading session on Monday. The Japanese Yen underperforms across the board despite hopes that Japan’s inflation would remain above the Bank of Japan’s (BoJ) 2% target for a longer period.

Last week, a Reuters report showed that the BoJ will keep focus on the risk of inflation overshooting the central bank’s target in its quarterly report due in July. The report also showed that the central bank may revise its economic growth forecast higher for the current year.

The scenario of higher inflationary pressures and upward economic growth revision would likely boost expectations that the BoJ’s monetary policy path will remain in the upside.

Meanwhile, the Euro trades higher amid growing expectations that the European Central Bank (ECB) will deliver another interest rate hike this year. Rising energy prices due to renewed aggression between the United States (US) and Iran have de-anchored global inflation expectations again.

Analysts at MUFC expect the ECB to deliver another 25 basis points (bps) rate hike in the September meeting.

Meanwhile, investors await fresh commentary from ECB officials regarding the Eurozone inflation outlook after headlines that the Strait of Hormuz, a critical chokepoint to almost one-fifth of global energy supply, is closed again.