EUR/JPY climbed to a multi-year high over 179.00, reaching 179.29 on Wednesday. This rise was helped by the persistent weakness of the Japanese Yen. The increase occurred after German inflation data showed a slowdown in price growth, leading to expectations of stable interest rates from the European Central Bank (ECB).

Inflation and Interest Rates

Germany’s Harmonized Index of Consumer Prices rose by 0.3% from the previous month and by 2.3% over the year. This aligns with the ECB’s goal for price stability. Isabel Schnabel from the ECB noted that interest rates are in a good position, although there are still some inflation risks. Meanwhile, Japan’s Prime Minister Sanae Takaichi’s push for ongoing loose monetary policies contributed to the weaker Yen. A fiscal stimulus package is expected in Japan on November 21, hinting that the Bank of Japan may delay any rate hikes beyond December. Traders are also on the lookout for potential Japanese government intervention in the currency market if the Yen weakens further. Currently, the interest rate gap between the Eurozone and Japan benefits EUR/JPY. The Euro was the strongest against the Japanese Yen, rising 0.56% against it. The heat map shows how much major currencies have changed against one another, with the Euro significantly outperforming the Yen. As of November 12, 2025, the interest rate difference between the ECB and the Bank of Japan (BoJ) is a key factor. The latest estimate for Eurozone inflation in October was 2.5%, slightly above the ECB’s target, which supports keeping interest rates high. This presents a good opportunity to hold long EUR/JPY positions through derivatives like futures or options due to positive carry.

Risk of Currency Intervention

The weakness of the Japanese Yen is likely to persist, especially as officials continue to support loose monetary policies to encourage growth. The BoJ ended its negative interest rate policy in early 2024, but this did not prevent the Yen’s long-term decline. Japan’s national core inflation data for October was a modest 2.1%, giving the BoJ little reason to consider a rate hike before the new year. We should stay vigilant about the risk of currency intervention from Japanese authorities, as they have acted in the past to halt sharp Yen declines. Major interventions occurred in late 2022, along with ongoing warnings in 2024 when the USD/JPY pair approached the 150-152 range. To manage this risk, traders may want to use protective put options on the EUR/JPY pair to guard against sudden reversals. In the coming weeks, the trend appears to favor a higher EUR/JPY, particularly ahead of Japan’s fiscal stimulus announcement on November 21. A bigger-than-expected stimulus could weaken the Yen further and push the currency pair higher. Strategies like bull call spreads could help traders profit from this anticipated rise while limiting potential losses if intervention happens. Create your live VT Markets account and start trading now.

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