USD / JPY Stable Above 105.00, Lacks Tracking

• USD / JPY gained some positive traction on Thursday amid resurgent USD demand.
• Risk aversion and falling US bond yields kept the pair’s strong gains in check.

The pair USD/JPY it maintained its modest gains during the first half of the North American session, although it lacked a solid following and fell around 15 pips from the daily highs.

The pair managed to regain some positive traction on Thursday and pulled away from nearly two-week lows, around the key psychological level of 105.00 touched in the previous session. The rally was solely sponsored by a strong rebound in demand for the US dollar, although a new wave of global risk-off trade kept strong gains for the USD / JPY in check.

Against the backdrop of a setback in the development of a vaccine for the highly contagious coronavirus diseases, concerns about a rapid rise in new COVID-19 infections provided a good boost to the dollar’s status as a global reserve currency. USD bulls remained in control following the release of mostly disappointing US macro data.

In fact, initial weekly Unemployment Claims in the US unexpectedly rose to 898,000 during the week ending October 10 and the prior week’s reading was revised up to 845,000 from 840,000 previously reported. Separately, the Empire State Manufacturing Index fell more than expected, to 10.5 in October from 17 in the previous month.

Meanwhile, the Philadelphia Fed manufacturing index rose to 32.3 in October against consensus estimates pointing to a modest drop to 14 from the prior month’s reading of 15. However, the data did little to provide a boost. significant to the USD / JPY pair. However, prevailing risk aversion undermined the safe-haven Japanese yen and limited the rise.

Global risk sentiment was affected as hopes for additional US fiscal stimulus measures waned. This was evident by a further bearish leg in equity markets and reinforced by a sharp drop in US Treasury yields.