• USD/JPY remains muted after the previous day’s slump on Wednesday.
  • Lower US Treasury yields undermine the demand for the US dollar.
  • US Dollar Index recovers from the daily lows toward 92.70.

After testing the weekly lows in the American session, USD/JPY manages to push above 109.70 in a 20-pip movement. The disappointing US Consumer Price Index (CPI)  induced broad-based USD selling pressured the USD/JPY near the higher levels. At the time of writing, USD/JPY is trading at 109.70, up 0.01% for the day.

The USD/JPY pair fell from the high of 110.16 on Tuesday following the sell-off in the greenback. The US Dollar Index (DXY), which tracks the performance of the buck against the basket of six major currencies retreated from the high of 92.66 to the test low of 92.29 before staging an advance back to the 92.60 level.

The US benchmark Treasury yields retreated on Tuesday after inflation data showed a slightly smaller-than-expected rise in prices. The yield on the 10-year Treasury bond fell 4.7 basis points to 1.277% before recovering towards 1.28%.

The CPI data came at 5.3% in August on a yearly basis slightly below the market expectations of 5.4%. Investors assessed the readings as a signal that Fed would not raise the interest rate any sooner.

On the other hand, the Japanese Yen gains on its safe-haven appeal as the optimism induced after the report that Japan is on track to reach the vaccination levels of the US and Europe.

As for now, traders are waiting for the Japanese Machine Orders, US Trade data, and Industrial Production data to gauge the market sentiment.

USD/JPY additional levels