EUR/JPY depreciates toward 177.00 due to possible BoJ rate hikes

• EUR/JPY falls as the Japanese Yen gains on the potential for a BoJ rate hike in upcoming meetings.
• Traders remain uncertain about the next BoJ rate hike amid expectations of aggressive fiscal spending under PM Takaichi.
• The Euro may receive support as traders expect no further ECB interest rate moves this year.

EUR/JPY continues its losses, trading around 177.20 during the Asian hours on Tuesday. The currency cross struggles as the Japanese Yen (JPY) receives support from last week's hawkish comments from the Bank of Japan (BoJ) Governor Kazuo Ueda, signaling the possibility of a rate hike in December or January next year.

However, the uncertainty prevails about the timing of the next BoJ rate hike amid speculations that Japan's new Prime Minister Sanae Takaichi will pursue aggressive fiscal spending plans and resist policy tightening. Meanwhile, newly appointed Finance Minister Satsuki Katayama clarified that she no longer stands by her March assessment that the JPY's fair value lies around 120-130 per dollar, emphasizing her current responsibility for overseeing currency policy.

However, the Euro (EUR) may receive support against its peers, limiting the downside of the EUR/JPY cross, from market expectations of no further interest rate moves by the European Central Bank (ECB) this year. The ECB kept interest rates unchanged for the third consecutive meeting in October, held last week, as expected, noting that the inflation outlook remains broadly stable, the economy continues to grow, and uncertainty persists.

Earlier data indicated that Eurozone inflation eased to slightly above the ECB's 2% target, while third-quarter GDP growth surpassed expectations. Additionally, October business surveys indicated an improvement in overall sentiment.

ECB policymaker Francois Villeroy de Galhau noted that the central bank is in a good position after the October policy decision. However, Villeroy added that this position is not a fixed one. Governor of the Central Bank of Latvia, Martins Kazaks, said that risks to inflation and growth in the Eurozone are more balanced. Kazaks added that the central bank would act when necessary but should avoid reacting hastily.