USD/JPY off weekly lows, still in the red below mid-108.00s

  • The safe-haven JPY benefits from fears of a further escalation in the US-China trade tensions.
  • The USD bulls remain on the defensive amid increasing bets for an eventual Fed rate cut move.

The USD/JPY pair dropped to fresh weekly lows during the Asian session on Thursday, albeit has managed to recover few pips thereafter.

The pair failed to capitalize on the previous session’s intraday rebound and remained on the defensive amid rising fears of a further escalation between the world’s two largest economies, which continued weighing on the global risk sentiment and benefitting the Japanese Yen’s relative safe-haven status.

The prevailing cautious mood was evident from declining US Treasury bond yield, which coupled with firming expectations that the Fed will eventually cut interest rates in 2019 kept the US Dollar bulls on the defensive and further collaborated to the pair’s slide to an intraday low level of 108.17.

Against the backdrop of last week weaker US jobs report, Wednesday’s softer US consumer inflation figures bolstered expectations for an interest rate cut by the Fed. However, the fact that the move is already priced in, investors might now be reluctant to place aggressive USD bearish bets and seemed to be the only factor that helped limit further downside.

Thursday’s US economic docket features the second-tier release of import prices and the usual initial weekly jobless claims, which seems unlikely to produce any meaningful impetus. Hence, the broader market risk sentiment and the USD price dynamics might continue to act as key determinants of the pair’s momentum on Thursday. 

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