The US Treasury announced that it would raise the limit on long-term Treasury buybacks and retirements from $2 billion to $4 billion. The dollar temporarily weakened in response, but USD/JPY is expected to remain under upward pressure for the time being.
In FX markets from 19 to 20 August, reports highlighted the RBA Deputy Governor's views on inflation and the acceleration in UK CPI, while the US Treasury was reported to be raising the buyback limit. This pushed US Treasury yields lower and, at times, prompted broad-based dollar selling. The FOMC minutes continued to address the outlook for moderating inflation and the possibility of further policy tightening, drawing attention to the future course of monetary policy.
In the USD/JPY outlook, the pair moved to around ¥158 following the latest developments, although it was considered necessary to assess movements in long-term interest rates and oil prices. Economic indicators and events scheduled for 20 August included employment-related data from Japan and the United States, as well as the release of Japanese inflation data.
Reports on equity, bond and commodity markets also covered movements in the Nikkei 225 and US stock indices, as well as long-term Treasury yields, indicating fluctuations in overall market risk sensitivity.
The forecast range for USD/JPY was ¥157.1 to ¥158.9, with the expansion of the US Treasury's buyback program potentially becoming a source of short-term volatility. The pair was expected to remain under upward pressure as markets assessed the impact of US Treasury yields, oil prices and the situation in Iran.