USD/JPY drops to fresh daily low near 109.50 on flight to safety

• USD/JPY continues to edge lower ahead of the American session.
• Wall Street's main indexes remain on track to open deep in the negative territory.
• US Dollar Index clings to modest gains above 93.00.

After closing the last two days of the previous week in the positive territory, the USD/JPY pair turned south on Monday with safe-haven flows dominating the financial markets. As of writing, the pair was down 0.45% on a daily basis at 109.48.

Dismal market mood helps JPY find demand

The sharp decline witnessed in major global equity indexes is providing a boost to the JPY at the start of the week. Reflecting the intense flight to safety, US stock index futures are losing between 1.8% and 1.5%. Moreover, the benchmark 10-year US T-bond yield is down nearly 4%, putting additional weight on USD/JPY's shoulders. 

Fears over the financial crisis in Evergrande, the second-largest real-estate firm in China, causing the global economy to lose growth momentum seem to be forcing investors to seek refuge in safer assets.

There won't be any high-impact data releases featured in the US economic docket and investors will remain focused on the performance of Wall Street's main indexes and fluctuations in the US T-bond yields.

On Wednesday, the Bank of Japan (BoJ) and the US Federal Reserve will be announcing monetary policy decisions.

Technical levels to watch for