It is an internal policy of IB Central Europe, not a regulatory one.

Here is the reply from their support in case someone also meets this issue:

"You were trying to convert currency BUY USD.JPY and since you did not have JPY balance in your account you got error message "FX trade would expose account to currency leverage"
In IB CE account. We will allow an FX transaction in the following circumstances:

• FX Conversion: Converting a positive currency balance to base.
• Debt Reduction: Reducing the net of negative currency balances.
• Debt Consolidation: Trading a negative currency balance from a non-base currency to base currency."

IB CE rules listed here:
https://gdcdyn.interactivebrokers.com/Universal/servlet/Registration_v2.formSampleView?formdb=4518