Forex News

Rabobank's Senior FX Strategist Jane Foley discusses USD/JPY in context of fiscal and debt dynamics in Japan and the United States (US). She highlights how government spending plans, changing demand for long-dated debt and Treasury Secretary Bessent’s buyback plan have influenced the Dollar and Japanese Yen. Rabobank maintains a 3‑month USD/JPY forecast of 158, while warning of potential near‑term upside attempts.

Fiscal risks weigh on USD/JPY

"As the USD fell yesterday following news of Bessent’s buyback plans, USD/JPY was steered a little further away from the psychologically important 160 level."

"On the assumption that the BoJ will accelerate the pace of rate hikes, we maintain a 3-month USD/JPY forecast of 158, though we cannot rule out the possibility of further attempts at the upside in the near-term."

"That said, in our view the USD will continue to draw support from its dominant position within the global payment system, indicating that it can retain its safe haven status."

"Firmer BoJ policy rates, structural reforms and a resilient economy suggest there is a path for the JPY to find support in the months ahead."

"That said, Japan’s 2027 budget talks later this year could have a strong impact on market sentiment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

BNY Mellon’s Geoff Yu notes Gold has surged through $4,500/oz. as investors reassess U.S. Treasury buybacks and their inflation implications. The report argues the intervention has calmed bond markets but may shift pressure into alternative stores of value like Gold and Bitcoin. Structural fiscal doubts and potential conflict with Federal Reserve objectives underpin the metal’s strength.

Treasury actions feed Gold demand

"One of the reasons the relief rally from the U.S. Treasury buyback announcement could be brief, is that short utilization wasn’t high in the first place in the long end. Our data confirm that. Investors took profit on long-end protection and didn’t rebuild it as the curve steepened."

"The subsequent rally therefore can’t be explained solely by cash-Treasury short covering; crowded steepener exposure is more likely concentrated in curve and derivative positions."

"Bond markets have calmed, which is meaningful, but the next test is whether managing the yield curve begins to conflict with monetary-policy objectives. If Treasury actions loosen conditions while inflation remains above target, the Fed may eventually need to offset some of that impulse. Gold pushing through $4,500/oz. and Bitcoin briefly touching $70,000 suggest markets don’t view the move as costless."

"Some of the adjustment may simply be migrating away from bond yields and into alternative stores of value."

"Although the U.S. actions have bought time and provided relief, official-sector intervention can only go so far and may prove counterproductive over time. Fiscal restraint remains structurally elusive globally, leaving inflation with a near-permanent fiscal markup."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Initial Jobless Claims dropped to 206K vs. the previous week.
• Continuing Jobless Claims went up to 1.799M.

According to a report from the US Department of Labour (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance shrunk to 206K for the week ending August 15. The latest print came in below initial estimates (210K) and was lower than the previous week’s 212K (revised from 209K).

Additionally, the 4-week moving average increased by 4.250K vs. the previous week’s revised prints.

The report also indicated that Continuing Jobless Claims rose by 18K to 1.799M for the week ending August 8.

Market reaction

The Greenback alternates gains with losses in the area of three-month lows against its peers on Thursday, with the US Dollar Index (DXY) retreating to the sub-99.00 region despite the decent bounce in US Treasury yields across the curve.