USD/JPY EASES FROM MULTI-WEEK TOPS, UP LITTLE AROUND 110.35-40 REGION

• USD/JPY gained traction for the third successive day amid a modest USD strength.
• A softer risk tone benefitted the safe-haven JPY and kept a lid on any further gains.

The USD/JPY pair retreated few pips from six-week tops and was last seen trading with modest daily gains, around the 109.35-40 region.

The pair built on this week’s solid rebound from the 109.10 horizontal support and gained some follow-through traction for the third consecutive session on Friday. The momentum was exclusively sponsored by the emergence of fresh buying around the US dollar, though reviving safe-haven demand capped the upside for the USD/JPY pair.

The USD drew some support from surging US Treasury bond yields, bolstered by prospects for an earlier Fed rate hike move. The so-called dot plot revealed a growing inclination among the Fed policymakers to raise interest rates in 2022 and pushed the yield on the benchmark 10-year US government bond back above 1.40% for the first time since July.

Meanwhile, uncertainty about potential risks from the debt crisis at China Evergrande Group dented tempered investors’ appetite for perceived riskier assets. This was evident from a modest pullback in the equity markets, which benefitted the safe-haven Japanese yen and kept a lid on any further gains for the USD/JPY pair, at least for now.

Market participants now look forward to Fed Chair Jerome Powell’s scheduled speech for some impetus later during the early North American session. This, along with the US bond yields, will influence the USD. Traders might further take cues from the broader market risk sentiment for some short-term opportunities around the USD/JPY pair.