USD/JPY trades with modest losses below mid-115.00s, NFP eyed amid geopolitical risks

• USD/JPY witnessed some selling on Friday and retreated further from an over two-week high.
• The global rush to safety benefitted the JPY and exerted pressure amid sliding US bond yields.
• A blowout USD rally helped limit any deeper losses ahead of the US monthly jobs report (NFP).

The USD/JPY pair remained on the defensive through the mid-European session and was last seen hovering near the lower end of its daily trading range, around the 115.30 area.

The pair extended the previous day's pullback from the 115.80 region, or the two-and-half-week high and edged lower for the second successive day on Friday. The global risk sentiment took a hit amid a further escalation of the Russia-Ukraine war and forced investors to take refuge in traditional safe-haven assets. This, in turn, benefitted the Japanese yen and exerted some downward pressure on the USD/JPY pair.

In the latest development, Russian troops attacked Europe's largest nuclear power plant in Ukraine and fueled fears of an environmental catastrophe. Moreover, Ukraine's regional authority confirmed that Zaporizhzhia nuclear power plant has been seized by Russian military forces. Adding to this, media reports suggest that gas flowing from Russia to Europe has come to a halt, which further weighed on investors' sentiment.

The global flight to safety led to a sharp decline in the US Treasury bond yields. This was seen as another factor that inspired bearish traders and contributed to the offered tone surrounding the USD/JPY pair. That said, a blowout US dollar rally back closer to June 2020 swing high helped limit deeper losses. Traders also prefer to wait on the sidelines ahead of the release of US monthly employment details.

The closely-watched NFP report is expected to show that the US economy added 400K new jobs in February and the unemployment rate ticked down to 3.9% from 4.0% in the previous month. A major divergence from the expected readings could infuse some volatility, though any immediate reaction is more likely to be short-lived. The market focus will remain glued to the incoming headlines surrounding the Russia-Ukraine saga.

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