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  • Haven demand for the dollar is likely powering gains in USD/JPY.
  • The pair hit three-week highs above 109.06. 

The upside in the US dollar is gathering steam and boding well for USD/JPY despite the grim global economic outlook and risk aversion. 

Tests 109.00

The pair clocked a session high of 109.06 a few minutes before press time, the highest level since Feb. 28, and was last seen trading near 108.70, representing a 0.70% gain. 

The coronavirus-led lockdown across Europe and in the US is likely to result in a sharp slowdown in their respective economies. The Senate approved the House-passed coronavirus bill on Wednesday and President Trump signed into law a coronavirus relief package that includes provisions for free testing for Covid-19 and paid emergency leave, according to CNN. 

However, no one believes that a one-time $1,000 cheque will be enough, according to BK Asset Management’s Kathy Lien.

Moreover, there is general consensus in the market that a vaccine for the virus is developed or the number of cases truly peak, the impact of any monetary or fiscal stimulus will be short-lived. As a result, the global equities are struggling to cheer the US fiscal stimulus talk. 

Even so, the US dollar is drawing bids. “There’s only one explanation for the dollar’s rally, which is a return of its safe-haven status,” Lien noted.

That said, the safe-haven rally in the US dollar may not last as the virus outbreak is showing no signs of a slowdown and could force the US authorities to put cities into lockdown, which will likely result in a prolonged economic slowdown. 

Technical levels