USD/JPY recovers from opening TRY led bearish gap

• USD/JPY recovers from the opening gap offer related to TRY volatility.
• Bulls step in to bring the pair back to flat for the day so far.

At 108.89, USD/JPY is currently trading flat on the day following a rebound from the opening gap lows of 108.57 to a high of 108.93.

Volatility has kicked in following President Tayyip Erdogan decision to replace Turkey's hawkish central bank governor with a like-minded critic of high-interest rates.

The yen spiked at the open on speculation that Japanese individual investors who have been buying the Turkey lira recently for its high rates would be forced to cut losses and close out their positions.

Concerns that the events in Turkey will cause disruptions in other financial markets have also fulled a bid in the greenback due to its status as a safe-harbour currency.

Meanwhile, US treasury yields were mixed in Friday’s session.

The Federal Reserve's chair, Jerome Powell, ha been vocally dovish of late which has seen the 2-year government bond yield in decline.

Powell reiterated in an interview that while the outlook for the economy has improved, the central bank plans to continue supporting the recovery:

“The recovery is far from complete, so at the Fed we will continue to provide the economy with the support that it needs for as long as it takes...I truly believe that we will emerge from this crisis stronger and better, as we have done so often before," Powell explained.

Fed speakers cone back to the markets this week.

''The many speakers will inevitably send mixed signals on how "patient" the Fed should/will be as the economy strengthens, although they are likely to be in agreement that actual—not just forecast—improvement is needed before the exit process starts. The chair made the case for patience last week, reinforcing the signal from the dot plot,'' analysts at TD Securities explained. 

Meanwhile, the long end yields have moved higher following the Fed announcement that the Supplementary Leverage Ratio exemption, which allowed banks to hold treasuries without holding required amounts of capital, is set to expire on 31st March.

As for the Bank of Japan, the central bank has increased the range by which it authorizes long-term rates to revolve, albeit maintaining a dovish stance.