- USD / JPY jumped to new multi-year highs during the early part of trading action on Wednesday.
- Risk appetite and a further widening of the US-Japan bond yield spread weigh on the safe-haven JPY.
- Moderate USD demand limits any further gains amid short-term overbought conditions.
The pair USD / JPY Consolidates Recent Gains to Multi-Year Highs and oscillates between tepid gains and minor losses during the European session on Wednesday. The pair moves just below 114.50, practically unchanged on the day.
After the good bounce the day before from below 114.00, the USD / JPY pair has gained some positive traction during the early part of the trading action on Wednesday. The risk appetite The prevailing currency has continued to weigh on the safe-haven Japanese yen, which was further pressured by the Widening the spread of government bond yield between the United States and Japan.
US bond yields resumed their uptrend that has been underway since late September, when the Fed signaled that it would begin reducing its monthly bond purchases in late 2021. On top of this, concerns that the recent widespread rebound Commodity prices will fuel inflation have been fueling speculation about a possible rate hike in 2022.
The prospects for an early tightening of monetary policies by the Fed pushed the benchmark 10-year US government bond yield to the highest level since May, around 1,672% on Wednesday. On the other hand, the yield on the Japanese 10-year government bond remained close to zero due to the Bank of Japan’s yield curve control policy.
The fundamental backdrop remains tilted in favor of the bulls, although overbought conditions on the short-term charts prevented investors from positioning themselves for any further bullish movement. Apart from this, a moderate demand for the US dollar was seen as another factor that contributed to the limited price action in a range of the USD / JPY pair.
In the absence of any major US economic release, traders will take cues from speeches scheduled by Chicago Fed Chairman Charles Evans and Fed Governor Randal Quarles. This, along with US bond yields, will influence price dynamics around the USD. Apart from this, the broader risk sentiment in the market could provide some boost to the USD / JPY pair.
USD / JPY technical levels
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