The U.S. Treasury indicated that it plans to expand its long-term Treasury buybacks, mentioning the possibility of increasing them to $4 billion or more. Against this backdrop, USD/JPY temporarily fell before entering a phase of searching for a new equilibrium.
In its report on Thursday, 20 August, the foreign exchange market saw the U.S. Treasury announce plans to expand its purchases and cancellation of long-term Treasuries, prompting initial dollar selling. The decline stalled near ¥158.03, after which the dollar rebounded sharply in overseas markets, moving toward a stronger dollar and weaker yen. Treasury Secretary Bessent indicated that the program could be expanded and said that a fiscal consolidation policy would be announced at the end of this week or early next week.
Among economic indicators, Australia's unemployment rate reached a high level of 4.5%, while U.S. initial jobless claims came in at 206,000, below market expectations. The four-week moving average, however, increased slightly from the previous week. Against a backdrop of market uncertainty, these figures are prompting the market to search for direction while correlating with USD/JPY's inclination toward stability.
The outlook for USD/JPY points to the ¥158.30 area as the current downside reference and the ¥159.70 area, this week's high, as the upside reference, with the market expected to continue searching for a new equilibrium. Trading within the range could change depending on movements in long-term interest rates and further information regarding fiscal consolidation.
A number of U.S. economic indicators are scheduled for release today, including the preliminary August manufacturing and services PMI figures. Short-term movements in USD/JPY are therefore expected to be particularly susceptible to these releases.