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  • USD/JPY continues to accumulate gains in the Asian session.
  • Higher US Treasury yields lift the demand for the US dollar.
  • Risk-aversion, higher interest rate expectations also added to the pair’s exuberance.

The strong buying interest in the US dollar keeps the USD/JPY pair buoyed in the  Asian session. The pair rallied almost 100 pips on Wednesday, booking the largest single day gain last seen in early April.

At the time of writing, the USD/JPY pair is trading at 109.58, down 0.06% on the day.

The move was primarily sponsored by the rebound in the US dollar index (DXY), which tracks the greenback’s performance against its 6 major counterparts.  

The higher than expected US inflation data, which rose to the biggest monthly increase in thirteen years, provoked US Treasury yields to touch a multi-day high at 1.70, with a 0.60% gain. This, in turn, pushes the DX above 90.70.

In addition to that, risk-aversion among investors based on the expectation of the Fed’s monetary policy tightening sooner-than-expected, as well as escalating Middle-East tension that boosted the demand for the safe-haven dollar.  

The US budget deficit came at record levels at USD 1.9 trillion for the first seven months of this budget year majorly on government spending and the stimulus package. This further added to the fears of rising taxes and higher prices cementing the outlook of rising interest rates in the near term.

On the other hand, accelerated coronavirus cases continue to haunt the Japanese economic recovery pace. Meanwhile, the Japanese policymakers expressed the need for continuous economic stimulus to support the pandemic-struck economy.  

The Current Account records a surplus of ¥2650.10 B in March. The value of loans increased 4.80% on April YoY basis.  Japanese Trade balance BOP Basis came at ¥983 B as compared to market estimate of ¥787 B. JPY remains unaffected largely on the data.  

The interest rate differentials of US-Japan continued to influence the pair’s performance in the short term.

As for now, investors turn their attention to the release of the US Producer Price Index (PPI), and Initial Jobless Claims to gauge the market sentiment.

USD/JPY Additional Levels


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