USD/JPY eases after refreshing yearly top above 142.00 as yields dribble amid full markets

USD/JPY retreats from the highest level since November 2022, print four-day uptrend despite grinding at multi-day top of late.
Yields struggle to defend initial run-up amid mixed concerns about US-China, Fed.
Japan FinMin Suzuki hints at stable fundamental, refrains from comments on FX.
Japan Industrial Production, US housing data may entertain Yen traders but Fed concerns are the key.

USD/JPY pares intraday gains at the seven-month high amid early Tuesday, falling from a multi-day peak of 142.25 to 142.00 by the press time. That said, the Yen pair previously cheered the US Dollar run-up and an upbeat start of the week by the Treasury bond yields to refresh the yearly top before retreating on the mixed catalysts.

That said, the US Dollar Index (DXY) prints a three-day uptrend near 102.60 by the press time even as the US Treasury bond yields struggle to defend the latest run-up. That said, the US 10-year and two-year Treasury bond yields grind near 3.82% and 4.75% respectively by the press time, after rising in the last two consecutive days.

It’s worth noting that the yield began the trading week on a firmer footing amid hawkish hopes from the Fed and fears of more US-China jitters. However, the People’s Bank of China’s (PBoC) rate cut and Japan Finance Minister (FinMin) Shunichi Suzuki’s comments appear to prod the market sentiment, US Treasury bond yields and the USD/JPY prices of late.

That said, the PBoC matches market expectations of announcing 10 basis points (bps) rate cut to propel the growth amid concerns that the world’s biggest industrial player is losing recovery.

On the other hand, Japan FinMin Suzuki said earlier in the day that FX should move stably reflecting the fundamentals. The policymaker refrained from commenting on the FX levels but highlighted the importance of stability in the market. It’s worth noting that Japan’s Industry Minister Nishimura also advocates for stability in the FX markets.

Elsewhere, the Fed monetary policy reports to the US Congress and the latest comments from the Fed officials have been hawkish and favor the US Dollar bulls. That said, the Fed policy report for Congress said, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters. Among the Fed talkers, Richmond Fed President Thomas Barkin, Chicago Fed President Austan Goolsbee and Federal Reserve Governor Christopher Waller were the important ones who appeared a bit hawkish of late.

It should be noted that the US Secretary of State Antony Blinken met China President Xi Jinping and Beijing’s top diplomat Wang Yi and raised hopes of an easing in the US-China ties. However, concerns about Taiwan keep challenging the route for cordial relations.

Amid these plays, S&P500 Futures print mild losses whereas the yields grind higher.

Moving on, USD/JPY is likely to remain firmer but the second-tier US housing data, Japan Industrial Production for April and Fed versus BoJ updates will be the key to watch for the clear directions.