USD/JPY consolidates daily gains below 110.00, eyes on US PPI data

• USD/JPY is edging higher following Thursday's sharp decline.
• 10-year US Treasury bond yield is up more than 1% on Friday.
• Investors await US PPI data, Wall Street's opening bell.

The USD/JPY pair lost more than 50 pips on Thursday before recovering modestly on Friday. As of writing, the pair was up 0.2% on a daily basis at 109.92.

Rebounding US T-bond yields support USD/JPY

The steep drop witnessed in the US Treasury bond yields weighed heavily on USD/JPY on Thursday. The benchmark 10-year US T-bond yield lost nearly 3% but managed to reverse its direction ahead of the weekend. Currently, the 10-year US T-bond yield is up 1.5% on the day at 1.32%, helping USD/JPY stay in the positive territory.

In the meantime, the improving market mood is also making it difficult for the JPY to find demand while limiting the USD demand as well. At the moment, the US Dollar Index is down 0.12% on the day at 92.41 and the S&P 500 Futures are rising 0.43%.

On the other hand, Reuters reported earlier in the day that the Bank of Japan (BoJ) was likely to warn against increasing risks to the economic recovery, citing the negative impact of supply chain disruptions on exports.

Later in the session, the US Bureau of Labor Statistics will release the Producer Price Index (PPI) data for August. Additionally, investors will keep a close eye on the performance of Wall Street's main indexes and the US T-bond yields.

Technical levels to watch for