- USD/JPY caught some bids on Wednesday and was supported by a broad-based USD strength.
- Intensifying Russia-Ukraine conflict benefitted the USD’s status as the global reserve currency.
- Modest rebound in the US bond yields further underpinned the buck and remained supportive.
The USD/JPY pair continued gaining traction through the early European session and climbed to a fresh daily high, around the 115.25 region in the last hour.
Following an early dip to the 114.80 region, the USD/JPY pair attracted fresh buying on Wednesday and for now, seems to have snapped two successive days of the losing streak. The uptick was exclusively sponsored by renewed US dollar buying interest and seemed unaffected by the cautious market mood, which tends to benefit the safe-haven Japanese yen.
A further escalation in the conflict between Russia and Ukraine kept investors on the edge, which, in turn, was seen as a key factor that benefitted the greenback's status as the global reserve currency. In fact, reports indicated that Russia has intensified the bombardment of Ukrainian cities and a large Russian convoy was approaching the capital Kyiv.
Apart from this, modest rebound in the US Treasury bond yields further underpinned the buck and acted as a tailwind for the USD/JPY pair. That said, expectations that the Fed would refrain from adopting a more aggressive policy response amid the recent geopolitical developments capped the upside for the US bond yields and the greenback, at least for now.
This might hold held back traders from placing aggressive bullish bets around the USD/JPY pair and warrants caution before positioning for any further appreciating move. Market players now look forward to the release of the US ADP report on private-sector employment and the Fed Chair Jerome Powell's testimony before the House Financial Services Committee.
The key focus, however, remains on the resumption of the Russia-Ukraine peace talks on Wednesday. The incoming headlines will play a key role in influencing the broader market risk sentiment and allow traders to grab some meaningful opportunities around the USD/JPY pair.