Euro / Yen - EUR/JPY

On the foreign exchange market (Forex), the fluctuations of the Euro in comparison with the Yen showed continuous depreciations of the Japanese currency from October 2000 and July 2007. In fact, the EUR/JPY cross went from a value of 89 to a peak at about 170 in July 2007 (1 EUR = 170 JPY).

As for the USD/JPY cross, of which movements were imitated by the EUR/JPY during this period (2000-2007) but being a bit more constant (in the sense of a Yen depreciation), the Japanese governmental and financial authorities’ monetary policy (low interest rates that promote the “carry trade” operations in favor of the purchase of Euro at a higher interest rate, Bank of Japan’s direct interventions, etc), greatly encouraged the EUR/JPY cross bullish spiral.

An important volatility of the EUR/JPY cross was observed from July 2007 to July 2008 (with true yoyo movements all along the year), but the EUR/JPY was again at a value near from 170 in July 2008. So a strong re-apprising of the Yen against Dollar since July 2007 hasn’t been immediately by the EUR/JPY cross.

On the other hand and despite all the efforts done by the Bank of Japan, a sudden collapse of the EUR/JPY parity (and so a sudden apprising of the Yen against the Euro) happened from August 2008 to December 2008 (EUR/JPY = 118 on December 1, 2008, which represents a 30% loss in four months) in the context of a drastic decrease of the reference rates of all the great Central Banks (including the Bank of Japan, but “carry trade” operations suddenly lost sense as well in the relation of the Yen/ Dollar as with Euro.

Investors seemed to have massively bought out the loans in Yen that had been used with “long” investments on Euro, (even if the European Central Bank decreased their rates in a more consistent way than the Fed or the Bank of England at the same period).  A slight recovery of the EUR/JPY cross rates has been observed since February 2009 (EUR/JPY = 128 on April 25, 2009).