USD/JPY Recovers From Its Largest Daily Loss In a Month To Trade Around 139.00 As Yields Recover From a Decline

USD/JPY remains stagnant near 139.00 as Tokyo opens for trading on Friday, following a decline in the Yen pair the previous day. In doing so, the risk-barometer combination validates the market's mixed concerns in the face of largely negative US data and bond market optimism. The same diminishes strident Fed concerns and weighs on the USD/JPY price ahead of market consolidation amid a light calendar and cautious mood ahead of the US Consumer Price Index (CPI) and Federal Open Market Committee (FOMC) monetary policy meeting next week.

The benchmark US 10-year Treasury bond yields reversed from the highest levels in two weeks to 3.72% the day before, and were hovering around the same levels at the time of publication, while the two-year counterpart yield also snapped a two-day winning trend to fall to 4.50% at the latest.

In contrast, US Initial Jobless Claims increased to 261K in the week ending June 2, compared to 235K anticipated and 233K previously (revised). Consequently, the four-week average rose to 237.25K from previous readings of 227.5K. In addition, Continuing Jobless Claims decreased to 1.757M in the week ending May 26 from 1.794M the previous week (revised), compared to market expectations of 1.8M. Earlier in the week, the US ISM Services PMI, S&P Global PMIs, and Factory Orders all posted negative results, which discouraged Fed skeptics and weighed on the US Dollar Index (DXY).

While yields exert downward pressure on the USD/JPY exchange rate and US data also weigh on the US Dollar, risk aversion struggles to justify market optimism in the wake of hawkish remarks from International Monetary Fund (IMF) spokesperson Julie Kozack. Thursday, the global lender highlighted inflation concerns and urged major central banks, including the Federal Reserve (Fed) of the United States, to pursue additional rate increases. "If inflation proves to be more persistent than anticipated, the Federal Reserve may need to maintain higher interest rates for a longer period of time," Kozack told reporters at a regular briefing.

As a result, the S&P500 Futures are unable to determine a distinct direction despite Wall Street's closing gains.

The most recent divergence between the Bank of Japan's (BoJ) monetary policy bias and the US Federal Reserve's (Fed) monetary policy bias appears to give USD/JPY bears reason for optimism.

Moving forward, a light calendar could keep the USD/JPY on track for a second consecutive weekly loss as investors prepare for the upcoming week's key catalysts.