USD/JPY investors track firmer yields above 140.00, while US PMIs and Japan GDP are watched

USD/JPY adheres to modest gains around 140.20 on the back of buoyant Treasury bond yields and a stronger US Dollar, which are propelling the USD/JPY exchange rate. The risk-aversion tsunami and unfavorable Japan data contribute to the Yen pair's appreciation.

In spite of this, Japan's Jibun Bank Services PMI for May fell to 55.9 from 56.3. In contrast, "The composite PMI, which combines the activity figures for manufacturing and services, expanded at the quickest rate since October 2013. The index rose to 54.3 in May from 52.9 in April, remaining above 50 for the fifth consecutive month, according to Reuters.

On the other hand, the US Treasury bond yields and the US Dollar are supported by hawkish Fed wagers and diminishing concerns of a US default. Nonetheless, the US employment figures released on Friday increase the likelihood of Federal Reserve (Fed) rate hikes.

Regarding the data, the US Nonfarm Payrolls (NFP) rekindled Fed hawkishness. In spite of this, the headline Nonfarm Payrolls (NFP) in the US employment report for May increased by 339K, compared to 190K expected and 294K previously (revised). Notably, the Unemployment Rate increased to 3.7% from 3.4% previously, exceeding market expectations of 3.5%. Noteworthy is the fact that Average Hourly Earnings decreased while the Labor Force Participation Rate remained unchanged.

Aside from that, the Shangri-la Dialogue in Singapore rekindled geopolitical concerns surrounding the United States and China despite the absence of a meeting between the policymakers of both countries, as well as an incident indicating a rise in Sino-American naval war fears in the Taiwan Strait. In addition, news from the Russian Defense Ministry indicating large-scale military operations by Ukraine further dampens sentiment and supports the US Dollar.

Notably, however, hawkish concerns regarding Bank of Japan (BoJ) officials and optimism regarding the US debt ceiling agreement, as well as the US credit rating, encourage USD/JPY supporters. In spite of this, US President Joe Biden signed the debt-ceiling measure, averting a 'catastrophic' default. Also negative for the DXY were concerns that the main central banks may slow their rate hikes. Moreover, despite Friday's positive price movement, the global rating agencies continue to be cautious about the US financial market's credibility and exert pressure on the US Dollar. Reuters reported on Friday that Fitch Ratings would maintain a negative outlook on the United States' AAA credit rating despite the agreement that will enable the government to meet its obligations.

In this context, Wall Street closed higher, and US Treasury bond yields have been moving upwards for the first time in four weeks. Notable is the fact that S&P500 Futures have posted modest losses amid conflicting sentiment.

Moving forward, today's US Services PMI and Factory Orders for May can amuse intraday speculators in advance of Friday's final readings of Japan's first quarter (Q1) 2023 Gross Domestic Product (GDP). For Yen pair traders, risk catalysts and bond market movements are paramount.