EUR/JPY Surges to above 142.50

Mario Draghi has something new to worry about as he prepares for tomorrow’s European Central Bank policy meeting: the euro-yen exchange rate.

The yen approached a six-year low versus the shared European currency after Bank of Japan Governor Haruhiko Kuroda surprised investors late last week by adding to a record stimulus program. Kuroda’s actions jeopardize the weaker euro that analysts say Draghi needs to reflate the economy, heaping pressure on him to come up with a policy response.
“Kuroda has thrown down the gauntlet to Draghi,” Robert Rennie, the head of currency and commodity strategy at Westpac Banking Corp., said yesterday by phone from Sydney. “Whether Draghi will, or can, accept the challenge remains to be seen.”