Euro hovers near 15-year peak against yen

Euro rose in European trade against yen, resuming gains after a two-day hiatus and approaching a 15-year peak again.

The common currency rose above 160 yen amid concerns about a widening policy gap between Europe and Japan as the European Central Bank opens the door for more interest rate hikes while Bank of Japan remains committed to an ultra-easy monetary policy.

EUR/JPY rose 0.8% to 159.02, with a session-low at 157.77, after losing 0.35% on Friday, the second loss in a row on profit-taking off 15-year highs at 159.33.

EUR/JPY lost 0.4% on profit-taking last week, the first weekly loss in three weeks.

European Rates

The ECB linked any potential policy tightening and interest rate hiking in the future to upcoming economic data.

As oil prices rallied again recently, consumer prices are expected to rally once more, raising inflationary pressures on ECB policymakers. 

Therefore if inflation remained stubborn, chances for a 0.25% ECB rate hike this year will rise once more.

BOJ

Recent data showed Tokyo consumer prices remained to normal levels, therefore removing the need for any changes in monetary policies.

Indeed, Bank of Japan announced back in July that it's holding on to a flexible monetary policy with negative interest rates as Japan's economy requires more assistance.

Interest Rate Gap

The current interest rate gap between Europe and Japan stands at 435 basis points, and might rise to 460 points if the ECB raised interest rates by 25 basis points in September.