The EURJPY cross is still set defensively at the 166.00 area as traders increase their bets on the possibility of the Bank of Japan (BoJ) increasing rates on Wednesday. Meanwhile, the Japanese Yen (JPY) persists in a rally.
Investors Await BoJ Meeting
Investors are seeking new impetuses ahead of Wednesday's BoJ monetary policy meeting. The BoJ's increasing rumors that it would hike interest rates and drastically scale back its monthly bond purchases continue to support the JPY against the EUR. Likewise, traders might unwind their carry positions before the BoJ announces its rate decision, which could boost the JPY.
Before the Bank of Japan's policy announcement, traders may unwind their carry trades, which might benefit the JPY. On Friday, Masato Kanda, Japan's chief currency diplomat, told the G20 that foreign exchange (FX) volatility badly impacts the country's economy. According to Reuters, Kanda highlighted the need to monitor the economy closely and put the necessary measures into place while mentioning a growing chance of a soft landing.
Meanwhile, rising geopolitical risks in the Middle East may boost safe-haven flows, improving the JPY. Israel has vowed to respond after accusing Hezbollah of carrying out the strike on a football field that claimed the lives of at least 12 people, including children. However, as reported by the BBC on Sunday, Hezbollah disputes any involvement in the attack.
