USD/JPY stays in negative territory near 108 despite rising US stocks
- Wall Street's main indexes push higher on Thursday.
- 10-year US Treasury bond yield recovers after losing more than 2.5%.
- US Dollar Index remains on track to post daily losses.
The USD/JPY pair rose to its highest level since early August at 108.48 during the American trading hours on Wednesday after the Federal Reserve refrained from giving any hints regarding the next policy move despite announcing a 25 basis points rate cut. However, the pair struggled to preserve its momentum and retreated to 108 area today. As of writing, the pair was trading at 108.04, losing 0.37% on a daily basis.
Following an upsurge to 98.66 yesterday, the US Dollar Index, which gauges the USD's value against a basket of six major currencies, reversed its course today. Although there were no apparent catalysts that could have triggered a USD sell-off, investors seem to be taking a step back while trying to asses if the Fed will opt-out for more rate hikes before the end of the year. As of writing, the index is down 0.2% on the day at 98.35.
Earlier in the day, the Bank of Japan (BoJ) kept its policy rate unchanged at -0.1% as expected. Regarding the policy outlook, BoJ Governor Kuroda said that they wouldn't hesitate to ease the policy without if there is a risk that the economy could lose momentum and miss the price goal.
Market sentiment recovers modestly
On the other hand, the 10-year US Treasury bond yield lost more than 2.5% earlier in the day to reveal a risk-off atmosphere and allowed the safe-haven JPY to gather strength against its major rivals.
In the second half of the day, major equity indexes in the US started the day in the positive territory on hopes of the US-China trade talks between deputy trade negotiators paving the way for a deal in October during high-level talks leading to a deal. Reflecting the recovering sentiment, which seems to be helping the pair limit its losses for the moment, the 10-year US T-bond yield erased a large portion of its earlier gains and was last down 0.8% on the day.
In the early trading hours of the Asian session on Friday, inflation data from Japan will be looked upon for fresh impetus. Markets expect the national Consumer Price Index (CPI) to tick up to 0.6% on a yearly basis in August from 0.5%. A lower-than-expected reading could put the JPY under bearish pressure as it would cause investors to start pricing a dovish shift in the BoJ's monetary policy.
Technical levels to watch for
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
