USD/JPY inter-markets: Yen gaining traction amid risk-off mood and dimming Fed rate-hike propects

After repeatedly failing to sustain its strength above 104.00 handle, the USD/JPY bulls finally seems to surrendered and the pair broke on the downside to currently trade at 6-day low level around 103.30 region. 

Following Monday's disappointing release of US manufacturing data, investors trimmed their expectations over an imminent Fed rate-hike move. The presumption is being supported by the ongoing slide in the US 10-year Treasury bond yield and is weighing on the greenback across the board.

Meanwhile, the pair's latest leg of downslide on Thursday has been primarily driven by prevalent risk-off sentiment, which is reaffirmed by drop in the Japanese 10-year bond yield and a sudden up-tick witnessed in the Volatility Index (VIX) as investors turn nervous ahead of final US Presidential debate between Donald Trump and Hillary Clinton. The US Presidential election of 2016 is scheduled on November 8, 2016. 

Market expectation over the timing of next Fed rate-hike action has been a key driver of the pair's momentum in the near-term. Hence, any further disappointing US economic data would further dent investor expectations and continued dragging the pair lower. Moreover, any additional up-tick in VIX would further boost the Japanese Yen's safe-haven appeal and attract fresh selling pressure around the major.

 

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