USD/JPY drops toward 106.00 amid stock market selloff
- USD/JPY staged a sharp U-turn during the American session.
- Nasdaq Composite is down nearly 5% on Thursday.
- US Dollar Index clings to modest daily gains around 92.80.
The USD/JPY pair rose to a fresh weekly high of 106.56 on Thursday but came under strong bearish pressure during the American session. As of writing, the pair was down 0.12% on the day at 106.05.
Risk aversion dominates financial markets
The negative shift in market sentiment, as reflected by the heavy selloff witnessed in major equity indexes in the US, is helping the JPY find demand as a safe haven in the second half of the day.
At the moment, the S&P 500 and the Nasdaq Composite indexes are down 3.5% and 5.05%, respectively. The lack of progress with respect to the next coronavirus aid bill in the US and an over-due correction seem to be causing US stock markets to fall sharply. Moreover, the 10-year US Treasury bond yield is losing nearly 5%, confirming the intense flight-to-safety.
Meanwhile, the US Dollar Index is staying in the positive territory near 92.80 as the greenback continues to outperform its risk-sensitive rivals and helps USD/JPY limit its losses for the time being.
Earlier in the day, the data from the US showed that the business activity in the service sector expanded at a strong pace in August. Additionally, weekly Initial Jobless Claims declined by 130,000 to 881,000 in the week ending August 29th. Nevertheless, these upbeat data failed to provide a boost to sentiment.
Technical levels to watch for