USD/JPY climbs to fresh multi-year highs above 118.00
- USD/JPY continues to push higher following last week's rally.
- Surging US Treasury bond yields fuel the pair's advance on Monday.
- US Dollar Index retreats below 99.00 on improving market mood.
The USD/JPY pair climbed above 118.00 for the first time since January 2017 on Monday. As of writing, the pair was trading at 117.95, rising 0.6% on a daily basis.
The sharp upsurge witnessed in the US Treasury bond yields seems to be fueling USD/JPY's rally at the beginning of the week. The benchmark 10-year US Treasury bond yield, which rose 15% last week, was last seen gaining more than 4% on the day at 2.09%.
In the meantime, the positive shift witnessed in risk sentiment is helping USD/JPY preserve its bullish momentum despite the modest selling pressure surrounding the dollar.
Market participants remain hopeful about geopolitical tensions easing on a diplomatic solution to the Russia-Ukraine crisis. "The next round of Russia talks will be on peace, ceasefire, immediate withdrawal of troops and security guarantees," a Ukrainian Presidential adviser said on Monday. Over the weekend, officials from both sides sounded relatively optimistic about reaching an agreement in the coming days. Reflecting the upbeat market mood, US stock index futures are up between 0.9% and 1.2%.
USD/JPY outlook
"Mid to late-cycle bearish flattening of the US yield curve should remain a positive for USD/JPY," ING analysts said in a recently published report. “We continue to see the pair grinding towards the 120 area.”
USD/JPY to grind higher towards the 120 area – ING
Technical levels to watch for