USD/JPY pares intraday losses, finds some support near 115.00 mark amid stronger USD

• A combination of factors dragged USD/JPY lower for the second successive day on Monday.
• The risk-off mood benefitted the JPY and exerted pressure amid retreating US bond yields.
• Modest USD strength assisted bulls to defend the key 115.00 round figure, at least for now.

The USD/JPY pair quickly recovered a few pips from the one-week low touched in the last hour and was last seen trading around the 115.20 region, still down nearly 0.20% for the day.

Following an early uptick to the 115.60 area, the USD/JPY pair turned lower for the second successive day on Monday and was pressured by a combination of factors. The risk-off impulse in the markets benefitted the Japanese yen's safe-haven status and acted as a headwind for the major. Bearish traders further took cues from an intraday pullback in the US Treasury bond yields, though a stronger US dollar helped limit any deeper losses.

The global risk sentiment took a hit amid worries over an imminent Russian invasion of Ukraine. In the latest development, a senior Russian military official reportedly said that Russia was ready to open fire on foreign ships and submarines that illegally enter its territorial waters. This further weighed on the market mood and forced investors to take refuge in traditional safe-haven assets, which was evident from sliding US bond yields.

On other hand, the USD remained well supported by the growing market acceptance that the Fed would adopt a more aggressive policy response to contain stubbornly high inflation. In fact, the markets have been pricing in the possibility of a 50 bps rate hike in March. This, in turn, held back bearish traders from placing aggressive bets and assisted the USD/JPY pair to defend the key 115.00 psychological mark, at least for the time being.

Traders now look forward to comments by St. Louis Fed President James Bullard, who called for 100 bps rate hikes over the next three FOMC policy meetings. This, along with the US bond yields, might influence the USD price dynamics amid absent relevant market-moving economic releases. This, along with the broader market risk sentiment and geopolitical developments, should provide some meaningful impetus to the USD/JPY pair.

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