USD/JPY climbs to 18-day highs near 106.50 on surging US T-bond yields

• USD/JPY is rising sharply in the American session.
• 10-year US Treasury bond yield is up more than 12% on Tuesday.
• US Dollar Index erases part of early gains.

Despite the broad-based USD weakness during the first half of the day, the USD/JPY pair stayed relatively quiet near 106.00 as the JPY struggled to find demand as a safe-haven. With the US Treasury bond yields surging higher in the American tracing hours, however, the pair gained traction and rose to its highest level since July 24th at 106.48. As of writing, the pair was up 0.45% on the day at 106.43.

Risk rally lifts US T-bond yields

Renewed hopes for an effective coronavirus treatment after Russian President Vladimir Putin announced that they have developed a vaccine provided a boost to risk sentiment on Tuesday. Both the Dow Jones Industrial Average and the S&P 500 started the day in the positive territory to reflect the upbeat market mood and the 10-year US Treasury bond yield advanced to its highest level since mid-July. At the moment, the 10-year T-bond yield is up 12.35% on the day.

Meanwhile, the US Dollar Index (DXY), which dropped to a daily low of 93.17 on Tuesday, staged a rebound in the last hours and climbed to mid-93.00s, allowing the bullish momentum of USD/JPY to remain intact.

There won’t be any significant macroeconomic data releases from Japan on Wednesday and risk perception is likely to continue to impact USD/JPY’s movements. Later in the day, the Consumer Price Index (CPI) data will be featured in the US economic docket.

Technical levels to consider