USD/JPY drops to fresh weekly lows, around 109.70 area
- A combination of factors dragged USD/JPY lower for the second consecutive session.
- COVID-19 jitters benefitted the safe-haven JPY and exerted some pressure on the pair.
- Sliding US bond yields kept the USD bulls on the defensive and did little to lend support.
The USD/JPY pair continued losing ground through the first half of the European session and dropped to fresh weekly lows, around the 109.70 region in the last hour.
The pair added to the previous day’s heavy losses and witnessed some follow-through selling for the second consecutive session on Thursday. Investors remain concerned about the spread of the highly contagious Delta variant of the coronavirus. Apart from this, softer Chinese GDP print further took its toll on the global risk sentiment, which benefitted the safe-haven Japanese yen and exerted some pressure on the USD/JPY pair.
Bearish traders further took cues from an extension of the overnight steep decline in the US Treasury bond yields, which kept the US dollar bulls on the defensive. Apart from this, Fed Chair Jerome Powell’s dovish testimony on Wednesday was seen as another factor that acted as a headwind for the greenback. During the semi-annual congressional testimony, Powell reiterated that the spike in inflation was only temporary.
Powell’s comments overshadowed a report, which showed that the US producer prices posted their biggest annual increase in nearly 11 years. This comes on the back of Tuesday’s data that revealed that the US consumer inflation jumped to the highest level in more than 13 years in June. The incoming macro data pointed to rising inflationary pressures, though failed to convince investors that the Fed will tighten its policy sooner than anticipated.
Market participants now look forward to the US economic docket, featuring the releases of the usual Initial Weekly Jobless Claims and Philly Fed Manufacturing Index. This, along with the US bond yields, will influence the USD price dynamics later during the early North American session. Apart from this, the broader market risk sentiment and Powell’s second day of congressional testimony should provide a fresh impetus to the USD/JPY pair.
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July 15, 2021 at 01:54AM