Euro rallied in Asian trade on Thursday against the yen, extending gains for the fifth straight session, and hitting 16-year highs after trading above 166 yen for the first time since 2008.

The yen is suffering from the persistent interest rate gap between Europe and Japan, which will likely remain fixed for an extended duration.

EUR/JPY

EUR/JPY rose 0.5% to 155.99 yen, the highest since 2008, with a session-low at 165.66.

The pair rose 0.3% yesterday, the fourth profit in a row after surpassing the psychological barrier of 165 yen.

Selloff

The yen is facing a heavy selloff amid mounting doubts about whether Japanese authorities will intervene to support the local currency.

Interest Rate Gap

The current Japan-Eurozone interest rate stands at 440 basis points in favor of the eurozone, and could potentially carry on like that for some time as the odds of an early ECB interest rate cut in June declined.

The Bank of Japan on the other hand isnt likely to enact any more interest rate hikes this year.

Japanese Rates

The Bank of Japan raised interest rates for the first time in 17 years in March, however it signaled there were no plans for any further hikes this year.