USD/JPY drops to daily lows near 108.60 pressured by risk aversion

• USD/JPY turned south ahead of the American session.
• Major European equity indexes suffer heavy losses on Tuesday.
• US Dollar Index edges lower toward 90.00 ahead of American session.

After spending the first half of the day in a relatively tight range below 109.00, the USD/JPY pair lost its traction and touched a session low of 108.59. As of writing, the pair was down 0.15% on a daily basis at 108.62.

Market mood sours

The negative shift witnessed in risk sentiment seems to be providing a boost to the safe-haven JPY on Tuesday. Major European equity indexes are down more than 2% on the day and the S&P 500 Futures are losing 0.8%, suggesting that the US stocks are likely to open deep in the negative territory.

On the other hand, the USD struggles to capitalize on risk-off flows and causes USD/JPY to stay on the back foot. The US Dollar Index, which posted small daily gains on Monday, is currently down 0.2% at 90.10.

However, the greenback could start finding demand in the second half of the day if the stock selloff picks up steam. Furthermore, the 10-year US Treasury bond yield is rising for the third straight day, confirming the view that the USD's losses could remain limited.

The JOLT Job Openings will be the only data featured in the US economic docket and the risk perception is likely to continue to impact USD/JPY's movements. On Tuesday, the Leading Economic Index and the Coincident Index from Japan will be looked upon for fresh impetus.

Technical levels to watch for