USD/JPY gives up gains amid falling stocks and retreats towards 114.50

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  • USD/JPY reversed the trend after failing to hold above 115.00.
  • A sharp decline in equity markets benefited the yen.
  • Treasury bond yields retreat from highs in months and give more strength to the yen.

USD/JPY erased intraday gains from multi-day high and pulled back towards 114.50. The pair had traded just above 115.00 before reversing the trend, against a backdrop of falling equity markets.

Treasury bond yields had helped USD/JPY higher. The benchmark 10-year rate soared to the highest level since January 2022 amid growing acceptance that the Federal Reserve would start raising interest rates in March 2022. By contrast, the Japanese government bond yield to 10 years remained close to zero as a result of the control policy of the yield curve of the Bank of Japan (Combat).

In addition, the BoJ reiterated that it will maintain an expansive monetary policy after finishing the monetary policy meeting on Tuesday. In the post-meeting press conference, BoJ Governor Haruhiko Kuroda reiterated that the central bank remains ready to further ease policy “without hesitation” if necessary.

In European hours, Treasury bond yields moderated their rise and stocks fell sharply, which favored the USD/JPY pullback. Wall Street futures point to an opening with falls on average greater than 1%.

The focus will continue on the bond market and stocks in the American session, which will return to normal after the holiday on Tuesday. The Empire State Manufacturing report will be published.

Technical levels

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