As haven flows ease, the USD/JPY currency pair has served as an indicator, rebounding back toward the 156.00 level after declining sharply. As it stands today, in the most recent trading session, the pair has gained 0.22%. This indicates a weak comeback for the US Dollar vs. the Japanese Yen. This shift occurs at a time of decidedly mixed economic data and clear tectonic plate shifting in global bond markets.
In November, the US manufacturing sector saw its ninth straight month of decline, spooking investors. Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) dropped to 48.2, from 48.7 in August. Typically, good data tends to have a negative impact on the USD. Thanks to still strong US Dollar, thanks to soaring US Treasury bond yielding.
The recent spike in US Treasury bond yields has provided support for the Greenback. Consequently, it continues to hold onto its recovery strength with the Yen. Markets are anxiously rewarding or punishing the Federal Reserve’s work after every December monetary policy meeting. To start out, 90% of futures traders are hoping for a quarter-point rate cut. The CME Group’s FedWatch Tool gives an 87% probability that this increase will occur. It is difficult to underscore how much this change could alter USD/JPY trading dynamics.
At the same time, Bank of Japan (BoJ) Governor Kazuo Ueda has dropped heavy hints about an interest rate hike in December. USD/JPY landscape This announcement has made global yields skyrocket, even the ones of Japanese bonds, further complicating the USD/JPY landscape. Risk aversion marked early European trading. As market participants eagerly analyzed the new developments, the global bond markets started to calm from Monday’s panicked sell-off.
So even with the continued headwinds for the US manufacturing base, the USD has made up some ground against the JPY. The Yen has so far lost 0.22% versus the Dollar today. This downturn is indicative of how the real estate market is reacting to other domestic and international economic indicators. XAU/USD is under pressure on the back of US Treasury yields moving higher. The recent USD bounce adds an additional layer of complexity and challenge for USD/JPY traders.
At the moment, USD/JPY is quietly drifting ahead of what will be a relatively macroeconomic release calendar. Financial markets are left to read an increasingly complex and sometimes contradictory set of economic indicators and guess the future actions of monetary policymakers. Primary among the dozens of factors to watch are rising US Treasury yields and potential shifts in monetary policy from the Fed and BoJ. Together, they will serve as huge drivers determining the future direction of this currency pairing.