- US yields have risen and the yield curve has been steepened by worse-than-expected US data, pushing USD / JPY higher.
- USD / JPY has risen above 104.00.
The USD/JPY it has risen above the 104.00 level again following the US labor market report on Friday November. The pair is moving away from the highs of 104.23, but is still trading with gains of around 30 pips of 0.3% on the day.
Rising US yields and risk flows affect the JPY
The US economy added just 245,000 jobs in November according to the Bureau of Labor Statistics (BLS), and although the unemployment rate fell to 6.7% from 6.9%, this was due to a decrease in the participation rate. to 61.5% from 61.7%. SLB said 3.9 million Americans were unable to look for work in November due to the pandemic, up from 3.6 million in October.
However, the pessimistic data on Friday has been taken as good news by the market; The S&P 500 has rallied to new all-time highs and US government bonds have sold off, with the 10-year yield rising 5bp to 0.97%, while the curve has also steepened at 2s / 10 also up around 5bp to 0.816%. Soft jobs data is seen to make short-term US fiscal stimulus more likely, given the pressure it puts on Congress to act quickly to avoid a further slowdown in the labor market. Once Congress acts and delivers the stimulus, the economy will recover faster, which will justify the increase in stock prices (or so the logic goes …).
The risk on flows, in general, weighed on the safe haven exchange rate on Friday; USD, CHF and JPY make up three of the four lowest G10 FX rates for the day. However, the US dollar is outperforming the JPY as a result of the rising and steepening of the US yield curve, making the parking of cash in US government bonds (and the purchase of the USD to do so) is more attractive compared to investing in Japanese government bonds.
USD / JPY within range
The rise in USD / JPY on Friday has signaled that the pair is now in a new range. On the upside, the highs of November 24 and December 2 mark the top of the range at 104.70. Meanwhile, to the downside, the lows of November 18 and 23 and December 3 at 103.60 mark the bottom of the range.
One hour chart
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