USD/JPY advances to 108.70 as 10-year US T-bond yield climbs above 1.8%

• Risk-off flows soften as markets wait for US Pres. Trump's statement.
• 10-year US Treasury bond yield continues to recover early losses.
• US Dollar Index clings to gains above 97 ahead of ADP data.

After dropping to its lowest level in nearly three months at 107.64 during the Asian session as reports of Iran launching missile attacks on US bases in Iraq forced investors to seek refuge, the USD/JPY erased its losses and moved sideways below 108.50 during the first half of the European session.

With risk-on flows returning in the last hour, the pair advanced to a fresh daily high of 108.76 and was last seen trading at 108.65, adding 0.2% on a daily basis.

Risk perception likely to continue to drive markets

Reflecting the recovering market sentiment US stocks futures turned positive on the day and the 10-year US Treasury bond yield rose above 1.8% to retrace the daily slump. The fact that there were no major developments surrounding the conflict between the US and Iran suggests that investors may be adjusting their positions while waiting for US President Trump's statement. Having said that, further escalation of the geopolitical tensions could trigger another wave of risk-aversion.

In the meantime, recovering T-bond yields seem to be helping the greenback find demand as well. Ahead of the ADP's private sector employment report, the index is up 0.15% on the day at 97.10, helping the pair preserve its daily gains.

Technical levels to watch for