The US Dollar (USD) rebounded against the Japanese Yen (JPY) on Thursday, with USD/JPY trading around 159.05, up approximately 0.55% on the day, recovering most of the previous session's losses [1]. This recovery was supported by a rebound in US Treasury yields, which rose about 6 basis points for both the 10-year and 30-year maturities after a sharp pullback on Wednesday. The pullback had been triggered by the US Treasury Department's announcement to increase liquidity-support buybacks for longer-dated government securities [1][2]. The US Dollar Index (DXY) also bounced from an intraday low of 98.56, its weakest since May 14, to trade around 98.90 [1].
Weekly US labor-market data provided additional support for the Greenback, as Initial Jobless Claims fell to 206,000 for the week ending August 15, below expectations of 210,000 and the prior revised reading of 212,000 [1]. Meanwhile, the Japanese Yen underperformed all major peers, weighed down by elevated oil prices, broader fiscal concerns, and relatively low interest rates [1]. Japan's imports and exports both reached record highs in July, with imports surging 27.8% year-over-year, driven by rising energy costs, and exports increasing 23.2%. The country posted a trade deficit of ¥634.5 billion [1].
Strategists at Societe Generale remain constructive on the Yen's medium-term outlook but note that a meaningful rebound may require another round of FX intervention or a significant decline in oil prices [1]. The Bank of Japan is expected to raise interest rates in September, while recent US data have strengthened expectations that the Federal Reserve will keep rates unchanged next month [1]. St. Louis Fed President Alberto Musalem commented that hiking rates now could prevent more aggressive action later, but sees a lower probability of inflation returning to the 2% target at current rates [1].
In contrast, the New Zealand Dollar (NZD) advanced for the second consecutive day, with NZD/USD trading around 0.5940, up 0.12% on the day [2]. The Kiwi was buoyed by expectations of further interest rate hikes by the Reserve Bank of New Zealand (RBNZ), following hotter-than-expected inflation data. Markets are now pricing in up to three additional RBNZ rate hikes through early 2027, with expectations of another tightening at the September meeting [2]. Stable monetary conditions in China, with the People's Bank of China keeping its Loan Prime Rates unchanged for the 15th consecutive month, also provided support due to strong trade ties between China and New Zealand [2].
US Treasury buyback operations, set to at least double in size for some long-dated securities starting September 9, were noted as a factor in recent market moves. BBH's Elias Haddad explained that these buybacks are a debt-management swap, shifting the composition of US debt toward more liquid securities, but the overall impact is expected to be limited given the small size relative to the $31.4 trillion Treasury market [2].
CONCLUSION
The US Dollar's recovery against the Yen was driven by a rebound in Treasury yields and supportive labor data, while the Yen remained pressured by high oil prices and fiscal concerns. Meanwhile, the New Zealand Dollar strengthened on expectations of further RBNZ rate hikes and stable Chinese monetary policy. Market reactions were moderate, with both currencies responding to evolving central bank outlooks and global economic developments.