Long-term interest rates plunged against the backdrop of the U.S. Treasury's Treasury purchase program, and the yen briefly strengthened into the low ¥158s per dollar. Expectations of a narrowing U.S.-Japan interest-rate gap fueled broader yen buying and dollar selling.
In Tokyo's foreign exchange market on the 20th, the yen briefly traded in the low ¥158s to the dollar, strengthening by roughly ¥1 from the previous evening. The move was attributed in part to a sharp decline in long-term interest rates after the U.S. Treasury announced a new Treasury purchase program.
On the 19th, the U.S. Treasury announced that it would raise the cap on buybacks of U.S. Treasuries with maturities of more than 10 years from $2 billion to at least $4 billion. The program will run from 9 September to 4 November.
The Treasury aims to improve liquidity and lower long-term interest rates by purchasing and retiring long-term bonds whose trading had become difficult.
This has prompted expectations of a narrowing U.S.-Japan interest-rate gap, spreading yen buying and dollar selling across the market.