USD/JPY bounces 40 pips from session lows despite rally in Asian stocks

• USD/JPY reverses early losses to trade near 105.50. 
• Dollar's recovery looks confounding in the wake of an uptick in Asian stocks. 
• The US 10-year yield remains under pressure near 0.66%.

The safe-haven American dollar is drawing bids despite the rally in Asian stocks and pushing USD/JPY higher. 

At press time, the currency pair is trading near 105.50, representing a 0.10% gain on the day, having put in a session low of 105.10 during the early Asian trading hours. 

While the exact reason for the turnaround in the US dollar is now known, the timing of the greenback’s recovery has coincided with the official announcement of Joe Biden as the Democratic nominee for the US Presidential elections, due in November. 

Besides, the dollar's bounce looks surprising as Asian stocks have rallied to seven-month highs, tracking the S&P 500’s record close on Tuesday. The dollar has been treated as a haven currency since the beginning of the coronavirus crisis. 

Also, speculation is rife that the Federal Reserve could soon signal greater tolerance for above-target inflation. The minutes from the July 28-29 Federal Reserve meeting are scheduled for release at 08:00 GMT on Wednesday. The US yields, too, are flashing red. As of writing, the 10-year yield is trading in the red near 0.66%, having recently hit a high of 0.73%. It remains to be seen if the greenback is able to keep and extend gains in Europe. 

Technical levels