USD/JPY sticks to gains above mid-115.00s, focus remains on Russia-Ukraine peace talks

The USD/JPY pair maintained its bid tone through the mid-European session and was last seen trading near the 115.75-115.80 area, or a two-and-half-week high.

A combination of supporting factors assisted the USD/JPY pair to capitalize on the previous day's strong move up and gain some follow-through traction for the second successive day. The global rush to traditional safe-haven assets that followed Russia’s invasion of Ukraine last week now seems to have abated amid hopes of a ceasefire. In fact, Ukraine's Presidential Adviser said that the delegation is headed for the second round of talks with Russia, which is set to start in a couple of hours. This, in turn, weighed on the Japanese yen and acted as a tailwind for the major amid modest US dollar strength.

Fed Chair Jerome Powell stated on the first day of his testimony before Congress that the US central bank could take tougher action if inflation levels do not come down. Adding to this, Chicago Fed President Charles Evans said that monetary policy is currently wrong-footed and needs to be upwardly adjusted toward neutrality. This, along with concerns about the worsening situation in Ukraine, benefitted the greenback's status as the global reserve currency and further extended support to the USD/JPY pair.

That said, a softer tone around US Treasury bond yields held back USD bulls from placing aggressive bets and kept a lid on any runaway rally for the USD/JPY pair, at least for the time being. Market participants are now looking forward to the US Weekly Initial Jobless Claims data. Apart from that, traders will take cues from Fed Chair Jerome Powell's second day of testimony for some short-term impetus. The focus, however, remains on headlines surrounding the Russia-Ukraine saga, which will play a key role in driving the pair.

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