USD/JPY clings near 110.30 amid weaker USD

• USD/JPY remains subdued on Tuesday.
• Rebound in US Treasury yields fails to uplifts the demand for the US dollar.
• Yen gains on its safe haven appeal despite the economic struggle.

The selling interest in the US dollar keeps gains limited for USD/JPY. The pair moves in a narrow trade band with no meaningful traction.

At the time of writing, USD/JPY trades at 110.28, down 0.01% for the day.

The move was primarily sponsored by the depreciative move in the US Dollar. The US Dollar Index( DXY), which measures the performance of the greenback against its six major rivals, eased from the high of 92.30 toward 91.85 with 0.38% losses.

Investors continued to digest the Fed’s surprise move on Wednesday. The central bank raised the inflation forecast very sharply with the forward guidance on the time to work on it. The Policymakers signaled two increases by the end of 2023. This, in turn, added to the demand for the US dollar.

The US Treasury yields traded at 1.48% on Tuesday, after falling to a four month low of 1.36% on the previous day. The yield curve flattens, while long dated Treasury yields fall considerably more as compared to the short term yields.

Meanwhile, New York Fed President John Williams said that the US economy is way far from achieving its job and inflation goals. The comments weigh on the US dollar.

In addition to that, Fed Chair Jerome Powell said in prepared testimony for a congressional hearing on Tuesday that the US economy continued to show signs of economic recovery and remained concerned about the notable increase in inflation.

The division between US President Joe Biden and Congress on the infrastructure bill funding plan also sour the sentiment around the greenback. 

On the other hand, the Japanese yen remains pressurized on the submissive economic outlook. However, weaker equity markets make the yen an attractive safe-haven bet.

The growth differentials in the US and Japan weigh on the prospects of the yen.

As for now, investors are waiting for the US Existing Home Sales Data, Richmond Fed Manufacturing Index, and Fed Chair Powell Testimony to gauge the market sentiment.

USD/JPY additional levels