USD/JPY pair may return to 113.00 amid falling yields

USD/JPY rebounded to 113.00 during its first open in Tokyo on Thursday, struggling to defend its first of a three-day advance. The yen appears to be receiving signals from the dollar’s rebound and a surge in global market volatility reflecting recent moves. But the Fed’s next move and eagerness to put safety at risk amid mixed fears of the Omicron crisis are keeping the Japanese currency at the top of the safe haven list and raising doubts among bull markets.

• USD/JPY hit an intraday high and fell near its two-month low, during the pre-NFP trade downturn, markets are sluggish and mixed signals from the Fed add to the hesitation.
• The US is considering extending the shelf life of masks after marking the first Omicron case. The OECD is downgrading its global growth projections, with Japan’s GDP expected to rise to 1.8% in 2021 from 2.5% in previous projections.

While reiterating concerns about inflation, Fed Chairman Jerome Powell said he still believes inflation will “fall significantly” in the second half of 2022, while speaking out against a Senate committee. In contrast, New York Federal Reserve Governor John C. Williams said the New York Times said Omicron could extend the supply-demand mismatch, leaving some inflationary pressure.

The 10-year Treasury yield is under pressure near its two-month low at around 1.42% at the time of release, while S&P 500 futures are trading up 0.30% since the Wall Street benchmarks released. But the promise of safety is supported by the latest news about corona virus options in South Africa. Following the first Oh Micron incident in the United States, the Joe Biden administration has put pressure on people to expand the rules for wearing masks on public transportation. “The administration of President Joe Biden will extend the requirement for travelers to wear masks on planes, trains, buses, and airports and train stations by mid-March to address the current risk of Omicron as reported by Reuter. Add to that risk shift and could be the latest economic forecast from the Organization for Economic Cooperation and Development (OECD), which suggests that global GDP will grow by 5.6% in 2021 (previously 5.7%) and 4.5% in 2022. According to Reuters, it is 3.2% in 2023.

However, trading has stalled ahead of the NFP, which appears to allow USD/JPY traders to consolidate their recent losses. Still, jobless claims and virus updates will be important to give a clear direction ahead of the monthly employment report to be released on Friday.