USD/JPY remains steady as broad risk aversion boosts both currencies

The USD/JPY currency pair remained mostly steady on Monday, as both the US Dollar and the Japanese Yen – traditional safe haven assets – drew support from souring risk sentiment stemming from geopolitical tensions in the Middle East.

Market sentiment dampened after the Palestinian group Hamas over the weekend launched the bloodiest attack on Israeli soil in 50 years, killing hundreds and abducting dozens of Israeli citizens.

In an act of retaliation, Israeli forces launched air strikes on housing blocks, tunnels and homes of Hamas officials in Gaza, which led to the death of at least 400 people, including children.

“The price the Gaza Strip will pay will be a very heavy one that will change reality for generations,” Israeli Defense Minister Yoav Gallant warned.

“As you’d expect, there’s a lot of uncertainty out there this morning in the markets,” Tony Sycamore, market analyst at IG Australia, was quoted as saying by Reuters.

“Where some of these risk-aversion moves are going to play out in the (currency) space, the dollar will remain bid… (and) the yen should start to see some more support coming in, but potentially, that’s more on the crosses.”

The US Dollar Index was last gaining 0.34% on the day to 106.457.

The dollar was additionally underpinned by exceptionally strong US jobs growth in September. US non-farm payrolls rose by 336,000 in September, data showed on Friday, easily outpacing market expectations of a 170,000 gain. It has been the strongest jobs growth since January.

Robust employment data could potentially keep inflation elevated. In this line of thought, the upcoming US CPI inflation report this week will be closely watched.

As of 7:35 GMT on Monday USD/JPY was inching down 0.05% to trade at 149.153. Last week, the major Forex pair went up as high as 150.160. The latter has been the pair’s strongest level since October 21st 2022 (151.944).