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Yen rises as lower US yields weigh on the US dollar

The Treasury says larger buybacks of longer dated debt, beginning September 9 through November 4, are aimed at improving long term bond market liquidity.

Reported · Written up by our desk · Major Pairs

The Japanese yen extended its intraday gains on Wednesday as the US dollar came under renewed selling pressure after longer term US Treasury yields fell sharply. In early trading, USD/JPY was around 158.47, its lowest level in more than a week, while the US Dollar Index was near 98.94, down 0.7% on the day.

FXStreet reports that the yield drop followed a US Treasury announcement of larger buybacks of longer dated government debt. The maximum size of each operation in the 10 to 20 year and 20 to 30 year maturity sectors will rise from $2 billion to at least $4 billion, with buybacks scheduled to run from September 9 through November 4 to improve liquidity in the long term government bond market.

The article says the 10 year benchmark yield fell by more than 5 basis points to about 4.64%, while the 30 year yield dropped nearly 10 basis points to around 5.18%. Lower yields reduced the appeal of dollar denominated assets and contributed to a broad decline in the greenback.

Attention also remains on the Federal Reserve outlook, with recent US employment and inflation data lowering expectations for an imminent rate hike, though energy driven inflation risks tied to the US Iran standoff over the Strait of Hormuz keep upside inflation concerns on the table. Traders are watching the FOMC July meeting minutes for clues, while on the Japan side, intervention concerns and hawkish expectations for the Bank of Japan support the yen, even as fiscal worries, higher oil prices, and wide interest rate differentials could limit its recovery.

Latest closeUSD/JPY 159.31 ▼0.1%|Dollar index 99.64 ▼0.3%

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