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  • USD/JPY’s recovery from five-month lows looks to have stalled near 107.50.
  • Yen is drawing offers in Asia as stocks are flashing green. 
  • The US treasury yields have recovered from overnight lows. 

USD/JPY bounced up strongly from five-month lows reached in early Asia, possibly tracking the uptick in the Asian equities, although so far, the upside has been capped around 107.50. 

Equities rise

Major Asian indices, except Australia’s S&P/ASX 200, are reporting moderate gains at press time. Asian investors seem to have taken heart from the decision by the US Federal Reserve (Fed) to cut rates by 50 basis points, the single biggest cut in over a decade. 

Currently, Japan’s Nikkei is adding 0.37% and South Korea’s Kospi is up 1.4%. The Shanghai Composite index is also adding 0.14% along with a 0.80% gain in the S&P 500 futures. 

Additionally, the US yields have recovered somewhat from the lows seen after Fed’s rate cut. The two-year yield is currently trading at 0.68%, representing a seven basis point gain on the overnight low of 0.61% and the 10-year yield has recovered to 0.98% from $0.91%. 

As a result, the haven demand for the yen has weakened in Asia. The USD/JPY pair is currently trading at 107.27, representing a 0.17% gain on the day, having hit a high of 107.52 a few minutes before press time. 

The pair had slipped to 106.85 in early Asia, the lowest level since Oct. 8, 2019, courtesy of the risk aversion on Wall Street. The US stocks dropped and the S&P 500 index shed 2.8% during the overnight trade, bolstering the haven demand of the yen, as Fed’s emergency rate cut signaled panic to investors.  “The downside of an emergency rate cut is, of course, that investors see this as an emergency,” Jeroen Blokland, Portfolio Manager for the Robeco Multi-Asset funds, Robeco ONE and Robeco Pension Return Portfolio, tweeted. 

Technical levels