- Optimism over the resumption of budget support talks in the US helped the USD / JPY gain ground.
- Nervousness over COVID-19, pessimistic market mood, and accommodating Fed expectations capped the rise.
USD / JPY traded with a slightly positive bias during the Asian session, although it did not have any follow-up buying and remained capped below 104.00.
After the intraday pullback of around 50 pips the day before, the pair managed to regain positive traction on Friday and so far appear to have broken six straight days of losing streak. The rise was supported by optimism over reports that Republican and Democratic leaders in the US Senate had agreed to resume negotiations on another coronavirus stimulus package.
That said, a further decline in the US stock markets supported demand for the safe haven Japanese yen and kept an eye out for any further gains for the USD / JPY pair. Global risk sentiment was hit after US Treasury Secretary Steven Mnuchin asked the Fed to return funds intended for COVID-19 loans to distressed businesses, nonprofits and local governments.
This follows growing market concerns about the economic fallout from the imposition of new coronavirus restrictions in several states in the United States and has further fueled speculation for further monetary easing from the Fed. This was reflected in the continued decline in yields on US Treasury bonds, which weighed on the US dollar and helped to cap the USD / JPY pair.
No major economic data on market developments is due for release from the United States on Friday. However, developments surrounding the coronavirus saga will continue to influence the safe haven JPY. This, combined with the price dynamics in USD, should help traders take short term opportunities on the last day of the week.