FX.co ★ Yen Strengthens as Dollar, Yields Retreat

The Japanese yen hovered around ¥158 per US dollar on Thursday, after appreciating nearly 1% in the previous session. The move was driven by a sharp pullback in the dollar and a decline in US Treasury yields, as Washington took steps to curb long-term borrowing costs by expanding its bond buyback program.

The US Treasury Department announced it would at least double the size of liquidity-support buyback operations for securities maturing in 10 to 30 years. The decision followed a recent spike in yields that had intensified concerns over market liquidity and financial stability.

Despite the yen’s latest gains, the currency remains under longer-term pressure, weighed down by wide interest rate differentials, rising fiscal risks, and elevated energy and import costs. Recent data also showed Japan’s trade deficit widened sharply in July, as imports surged to a record high on increased crude oil purchases. Export growth, however, remained solid, underpinned by strong global demand for AI-related chips.