FX
  • USD/JPY remains subdued on Friday.
  • Lower US Treasury yields undermine the demand for the US dollar.
  • Yen gains as GDP shrink less than expected.

The selling pressure surrounding the US dollar keeps USD/JPY off the cliff in the initial Asian trading hours. The USD/JPY pair touched the intraday high of 109.79 in the New York session, however, failed to sustain the level.

At the time of writing, USD/JPY trades at 109.36, up 0.04% for the day.

The move is exclusively sponsored by the depreciation in the US dollar, which followed the US 10-year benchmark yields. The yields on Treasuries fell back to 1.5% at their lowest level since early March. 

The much anticipated US Consumer Price Index (CPI) came at 5% above the market, the highest since August 2008 and above the market expectations.  The Initial Jobless Claims were marginally higher than expected at 376K but fell to a new pre-pandemic low.

Investors shrug off the inflationary fears and consider them temporary, driven by pent-up demand due to the supply bottlenecks as the US economy reopens. The data fails to create demand for the US dollar.

Meanwhile, a US House Committee approved a $547b infrastructure package while adopting part of the Biden administration proposal as part of his $2.3 trillion infrastructure package.

On the other hand, the yen gained some traction after the data came in which showed that the Japanese economy shrank less than expected in Q1. 

Additionally,  the Bank of Japan (BOJ) will keep its negative interest rates and asset purchase program unchanged in its upcoming monetary policy meeting, a Bloomberg survey revealed, which keeps the gains limited for the currency.

As for now, investors await for the US Michigan Consumer Sentiment Index to gauge the market sentiment.

USD/JPY additional level

 

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