USD/JPY steadies near 107.50 as risk aversion helps JPY stay resilient
- Major European equity indexes post heavy losses on Tuesday.
- US Dollar Index climbs to highest level since April 8th.
- Wall Street looks to open deep in negative territory.
The USD/JPY closed the first day of the week virtually unchanged and edged lower on Tuesday with risk aversion allowing the JPY to find demand. However, the broad-based USD strength allows the pair to limits its losses. As of writing, the pair was trading at 107.42, erasing 0.18% on a daily basis.
Flight-to-safety dominates financial markets
The poor performance of global stock indexes amid plunging crude oil prices and the lack of positive developments surrounding the coronavirus outbreak cause investors to continue to seek refuge in safer assets on Tuesday. At the moment, major European equity indexes are erasing between 1.8% and 2.7% and US stock index futures are down more than 1%. Reflecting the dismal market mood, the 10-year US Treasury bond yield is falling around 6%.
Meanwhile, the Bank of Japan noted in its semi-annual report that a prolonged coronavirus pandemic could destabilize the financial system through increased risk lending to overseas energy firms.
On the other hand, the US Dollar Index, which touched its highest level in nearly two weeks at 100.37 earlier in the session, is posting gains for the second straight day to help the pair limit its losses. In the second half of the day, Existing Home Sales will be the only data featured in the US economic docket and investors are likely to continue to react to changes in the market sentiment.
Technical levels to watch for