USD/JPY rebounds modest from monthly lows, steadies below 109.50

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  • USD/JPY remains on track to post losses for second straight day.
  • Recovering US Treasury bond yields helped USD/JPY erase part of its daily losses.
  • Wall Street’s main indexes trade in the positive territory.

Following Tuesday’s decline, the USD/JPY pair stayed under bearish pressure in the first half of the day on Wednesday and dropped to a monthly low of 109.11 before staging a rebound. As of writing, the pair was down 0.25% on the day at 109.40.

10-year US T-bond yield gains traction

Earlier in the day, the broad-based USD weakness and falling US Treasury bond yields caused USD/JPY to continue to push lower. However, the benchmark 10-year US T-bond yield, which lost more than 1% earlier in the day, reversed its direction and was last seen rising 2.5% at 1.316%, helping USD/JPY erase a portion of its daily losses.

Meanwhile, the positive shift witnessed in market sentiment is making it difficult for the greenback to gather strength and capping USD/JPY’s upside. Currently, the S&P 500 Index is up 0.7% on the day and the US Dollar Index is posting modest losses at 92.55.

The data from the US showed on Wednesday that the NY Fed’s Empire State Manufacturing Index improved to 34.3 in September from 18.3 in August.

On the other hand, Bank of Japan (BoJ) Governor Haruhiko Kuroda said on Wednesday that they will further relax monetary policy such as by reducing interest rates if necessary. Nevertheless, this comment had little to no impact on the JPY’s performance against its rivals.

There won’t be any high-tier data releases from Japan on Thursday and August Retail Sales data from the US will be looked upon for fresh impetus later in the day.

Technical levels to watch for