Japanese Yen pauses advance as Treasury announcement supports US Dollar
USD/JPY remains on the back foot on Wednesday but lacks follow-through selling as the US Dollar (USD) recovers following the Treasury’s announcement of a larger bond buyback. The pair trades around 153.50 after briefly falling below 153.00, its lowest level since February.
On Wednesday, the Japanese Yen paused its advance as the US Dollar strengthened following a Treasury announcement of a larger bond buyback. The USD/JPY pair fell to around 153.50, its lowest level since February, after briefly dipping below 153.00. The US Treasury indicated it could purchase up to $6 billion of longer-dated debt on Thursday, surpassing the previously stated minimum of $4 billion per operation.
US Treasury yields rose in response, with the 10-year yield reaching around 4.85%, its highest level since November 2023. The US Dollar Index (DXY) also showed a slight recovery, trading near 98.80 after dipping to its lowest level since August 21.
Despite the technical and fundamental factors favoring the Japanese Yen, expectations of a more aggressive Bank of Japan (BoJ) tightening kept the Yen on an upward trajectory. Analysts noted that the market anticipated a rate hike at the BoJ's September 17-18 meeting, which was priced in. Inflation data releases, including Thursday's US Producer Price Index (PPI) and Friday's Consumer Price Index (CPI), would further influence the USD/JPY pair.
Strategists at Scotiabank highlighted that the yen's upside potential remained strong due to limited data releases and a relatively empty calendar ahead of the BoJ's decision on September 18, where a 25 basis point rate hike was fully priced in.
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