EUR/JPY rose for a second day on Tuesday, trading at 184.47. It neared two-month highs in the 184.65–184.75 range, as the Japanese Yen remained weak.
The Yen faced pressure amid concerns about the economic effects of high oil prices. The focus was on the Strait of Hormuz, with worries if Iran does not reopen it soon.
Yen Weakness And Oil Price Risks
Japan is a major oil importer, and higher energy costs can lift price pressures. Underlying inflation has reached the Bank of Japan’s 2% target and is expected to accelerate if the war in Iran continues.
Markets are pricing a 50% chance of a Bank of Japan rate rise in April. They are also almost fully pricing a rise before the summer.
The European Central Bank is also expected to raise rates soon, with April seen as a possible date. Governing Council member Dimitar Radev said more data is needed before confirming an April move.
A correction dated April 7 at 09:05 GMT stated the pair reached 184.50, not 154.50. It also said 184.75 is the two-month high, not a March high.
Options Strategies For EUR JPY
Given the yen’s weakness, we should consider buying EUR/JPY call options to capitalize on the upward trend toward the 184.75 highs. The immediate pressure on the yen is coming from oil prices, linked to the risk of Iran closing the Strait of Hormuz. With May and June expirations, these options would give us exposure to continued momentum while limiting our downside risk.
The geopolitical risk is very real, as nearly a fifth of the world’s daily oil supply passes through the Strait of Hormuz. A prolonged closure would almost certainly push Japan’s inflation well above the current 2% target, seriously complicating the Bank of Japan’s policy. We saw a similar, though smaller, oil shock impact the yen negatively back in 2025, when prices last broke $100 per barrel.
However, we must also prepare for a sharp reversal if the BoJ acts decisively. The futures market is already signaling a high probability of a rate hike before summer, a move that would be historic after decades of low rates and would strengthen the yen. Therefore, buying some out-of-the-money EUR/JPY put options could be a cheap way to hedge against a surprise BoJ announcement or a sudden de-escalation in Iran.
The European Central Bank’s own expected rate hike adds another layer, potentially capping the pair’s rise if they move in April as anticipated. The key question is which central bank will be perceived as more aggressive over the next quarter. We are watching euro zone inflation data closely, as a stronger-than-expected print could solidify the ECB’s resolve and keep the euro firm.
With major policy decisions from both the BoJ and ECB expected this month, implied volatility is increasing. The uncertainty makes a long straddle an attractive strategy, involving the purchase of both a call and a put option at the same strike price. This would allow us to profit from a significant price move in either direction following the central bank meetings.
