USD/JPY has made a minor recovery from two-week lows hit earlier this week.
Because there was no evident fundamental driver for the upswing, it is more likely to be capped.
The safe-haven JPY may benefit from the risk-off mentality if US bond yields fall.
The bulls in the dollar remained cautious ahead of the highly anticipated FOMC minutes.
The USD/JPY pair recovered roughly 30-35 pips from two-week lows hit during the Asian session, and was last seen trading with minor gains near 110.70-75.
On Wednesday, the pair drew some purchasing near the 110.40 range, and it appears to have halted its current slide from YTD highs, which was last week around the 111.65 mark. The USD/JPY pair has finally gone into positive territory for the first time in four days, however a number of reasons could limit any further gains.
Concerns about the extremely contagious Delta version of the coronavirus continued to dampen investor confidence. The general cautious sentiment in the equity markets reflected this, which might support the safe-haven Japanese yen. This, combined with low demand for the US dollar, might further limit the USD/JPY pair’s upside potential.
The USD bulls struggled to build on the previous day’s positive rise higher amid expectations that the Fed will delay tapering its asset purchases or boosting interest rates. As a result, the market’s attention will be drawn to the release of the FOMC minutes from its June meeting, which will be scrutinized for indications regarding the US central bank’s monetary policy stance.
A weaker tone surrounding US Treasury bond yields was also viewed as a factor that worked as a drag for the greenback. This makes it smart to hold off on verifying that the USD/JPY pair has bottomed out in the near term and preparing for any further appreciating rise until there is some substantial follow-through purchasing./n
