The USD/JPY pair held on to its modest gains through the early European session and was last seen hovering near the highest level since July 2020, around the 107.15 region. The pair prolonged its recent bullish momentum and continued gaining traction on Thursday. The uptick marked the seventh day of a positive move in the previous eight and remained well supported by the optimistic global economic outlook. The impressive pace of COVID-19 vaccinations and the progress on a massive US fiscal spending plan have been fueling hopes for a strong global economic recovery, which has been weighing on the safe-haven Japanese yen.
On the other hand, the US dollar benefitted from the recent rally in the US Treasury bond yields. The prospects for a relatively stronger US economic recovery and the passage of US President Joe Biden's $1.9 trillion relief package forced investors to price in a possible uptick in inflation. This, in turn, raised doubts that the Fed would retain ultra-low interest rates for a longer period and continued underpinning the US bond yields.