Euro rose in Asian trade on Wednesday against the yen, extending gains for the sixth straight session and hitting 32-year highs. 

The Europe-Japan interest rate gap continues to underpin the euro against the yen, and that will likely remain so for the rest of the year. 

The Japanese government recently announced a negative revision of Japan’s GDP numbers in the first quarter, heaping more pressure on policymakers and hurting the prospects of more rate hikes this year.

The Price 

The EUR/JPY pair rose 0.15% today to 173.69, the highest since 1992.

The euro rose 0.1% against the yen yesterday, the fifth profit in a row after piercing the psychological level of 172 yen per euro. 

Selloff 

The yen has faced a heavy selloff against major rivals amid doubts that the Japanese government might not intervene after all to support the yen. 

Rate Gap

The interest rate gap between Europe and Japan is currently holding at 415 basis points in favor of the eurozone, in turn underpinning the euro’s against the yen. 

The European Central Bank is not likely to cut interest rates anymore this year, while the Bank of Japan is not likely to raise rates this year after recent developments. 

BOJ 

At the June 14 meeting, the Bank of Japan maintained the current program of government bond purchases at 38 trillion yen a month.

The bank said it’ll draw up plans to reduce purchases in the next year or two at the July meeting. 

Such steps were considered as signals towards normalizing the monetary policy, eventually leading to more rate hikes. 

However, after the government reported a deeper contraction than expected in the first quarter, many analysts now expect the BOJ to hold off such plans. 

Federal Reserve Chair Jerome Powell said in his speech today at the Central Banks Forum in Portugal that he wants to exert more efforts to control inflation before taking the decision to cut interest rates.

Powell warned from cutting rates prematurely, adding that central banks should be more confident first that inflation is sustainably moving towards 2%. 

He added that moving prematurely on rates could upend the good work that was done so far.

Powell refused to answer any questions about the possibility of a Fed rate cut at the September meeting. 

Most US stock indices gained ground on Tuesday ahead of Federal Reserve Chair Jerome Powell’s speech later today.

Powell is attending a conference alongside several other central bank governors in Portugal and will speak about monetary policy. 

According to the Fedwatch tool, markets are estimating there’s a 70% chance of a Fed rate cut in September. 

On trading, Dow Jones fell 0.1%, or 15 points as of 16:41 GMT to 39,154, while S&P 500 rose 0.1%, or 7 points to 5482, as NASDAQ added 0.3%, or 62 points to 17,944.

Dollar rose in European trade on Tuesday against a basket of major rivals, on track for the first profit in four days as US 10-year treasury yields rebounded, in turn boosting the greenback.

The gains came ahead of a speech by Federal Reserve Chair Jerome Powell in Portugal, which could include clues on the future of the monetary policy. 

The Index

The dollar index rose 0.2% today to 106.05, with a session-low at 105.83. 

The index closed down 0.1% on Monday on profit-taking off eight-week highs at 106.13. 

US Yields 

US 10-year treasury yields traded near four-week highs at 4.493%, underpinning the dollar.

US Rates 

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut stood at 65%, and at 78% for November. 

Powell 

The developments came ahead of Fed Chair Jerome Powell’s speech later this week in Portugal, which might include clues about the future of US interest rates.

Also later today, data on the JOLTS Job opportunities will be released, expected to show the availability of 7.96 million jobs in May compared to 8.06 million in April.