- USD/JPY falls weighed down by falling 10-year US bond yields and a weaker dollar.
- Weaker-than-expected data from China triggered risk aversion, despite the easing of Covid-19 restrictions.
- US economic data from last Friday suggests that the Federal Reserve has some work to do.
The pair USD/JPY falls at close on Wall Street after hitting a daily high of 137.85 and a low of 136.21, weighed down by broad-based US dollar (USD) weakness, as economic data from China threatens to derail global economic recovery amid easing of the Covid-19 restrictions. These factors, along with demand for US Treasuries, caused yields to fall, weakening USD/JPY. At the time of writing, USD/JPY is trading at 136.32.
Risk Aversion keeps US stocks trading at a loss. The dollar remains weak on the session, on falling US Treasury yields, with the 10-year US Treasury yield plunging 11 basis points to 3,422%. For its part, the 10-year and 2-year yield curve registered its largest inversion in 40 years, standing at -0.842%, a sign of a possible recession in the United States.
Elsewhere, China reported November Trade Balance, which disappointed expectations, while exports fell 8.7% year-on-year versus an estimated 3.5% contraction. As for the Covid-19 restrictions, the Chinese authorities announced that people with Covid can isolate at home if they have mild or no symptoms. Also, PCR tests are no longer required to visit most places.
Meanwhile, economic data for the past two weeks in the United States has shown the economy’s resilience. Upbeat jobs data, rising wages above the 5% threshold and beating US ISM services PMI estimates further cemented the case for a 50-point rate hike basics by the Federal Reserve. Also, ahead of the Fed’s decision, US inflation data would give USD/JPY traders clues as to the magnitude of the rate hike.
In Japan, the economic calendar will include the GDP Growth Rate for the third quarter, which is expected to contract 0.3% mom, while the annual reading is expected to fall 1.1%. In addition, the Current Account is estimated at 623.4 billion yen.
Key technical levels for USD/JPY
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
