USD/JPY hangs near 110.00 on firmer USD, risk-aversion

• USD/JPY kickstarts fresh trading week in a muted tone.
• US Dollar Index remains strong above 93.00 on mixed economic data.
• Coronavirus jitters, geopolitical tensions keep inflow to safe-haven Yen.

USD/JPY treads water in the early Asia session on Monday morning. The pair tested the low of 109.21 in the previous week and remained pressured near 110.00, only to trade in a very narrow trade band. At the time of writing, USD/JPY is trading at 109.97 down 0.01% for the day.

USD/JPY failed to capitalize on the gains in the greenback, which rallies above 93.00 and touches the highest level since August 22.  The US Dollar Index (DXY), which tracks the performance of the buck against the basket of six major currencies, remains elevated near 93.20 with 0.03% gains. The US benchmark 10-year Treasury yields rose by 4 basis points to 1.37% as investors tighten their seat belts ahead of the Federal Reserve meeting this week.

The University of Michigan’s consumer sentiment index jumped 71 in September from a decade low 0f 70.3 in August, below the market consensus of 72, the readings fuel the uncertainty on Fed timing on rolling back of stimulus. Meantime, as per the latest report, US Senator Manchin wanted a vote on the budget reconciliation package this month. He thinks Congress should delay US President Joe Biden's $3.5 trillion stimulus package until 2022.

On the other hand, the Japanese Yen found some bidding over the rising concerns of the Delta variant in the Asia-Pacific region. Furthermore, the stock market in China and Japan closed today, thus squeezing liquidity out of the market. In the absence of any major economic data, the market dynamics and risk-catalyst would influence the pair’s performance in the short term.

USD/JPY additional levels