Citi estimates the euro against the yen at roughly ¥184 per euro when averaged across the 2017-2025 period, and at about ¥191 per euro for the more recent 2023-2025 span, according to a research note published Tuesday.
The bank's assessment finds no material price distortion in the EUR/JPY market at present. At the same time, Citi notes that proactive yen-buying interventions by Japanese authorities may have had the effect of nudging the exchange rate modestly lower than it otherwise would have been.
In Citi's view, historical gains in Japanese equities have been the dominant factor elevating its EUR/JPY estimate. Those equity market gains are cited as the main driver behind the bank's higher valuation for the currency pair over the examined timeframes.
Citi also reports a reduced role for interest rate differentials in dictating the long-term trajectory of EUR/JPY. The influence of the interest rate spread has been waning, the note states, and the bank identifies a likely long-term ceiling in the ¥180-¥190 per euro zone.
The research further highlights a policy implication: should Japanese equity markets remain strong, authorities may need to continue intervening to buy yen in order to manage further yen depreciation. Citi indicates these interventions would probably be conducted mainly against the U.S. dollar, though the EUR/JPY rate is affected by the same dynamics.
Market trading in EUR/JPY has reflected these forces as Japanese officials act to limit currency volatility through market operations. Citi's assessment presents a framework where equity performance and intervention activity are central to the pair's valuation, while interest rate differentials play a diminishing role.
These conclusions are presented as the bank's fair-value estimates for the specified periods and as an interpretation of the current interaction between equity markets, intervention policy and currency valuation.