Yen Firms as US Buybacks Drag Dollar Ahead of PCE Data

Key Moments

Dollar-Yen Pulls Back in Asian Trading

USD/JPY is trading softer around 158.90 during Wednesday’s Asian session, with the pair losing ground as demand for the Japanese Yen (JPY) improves against the U.S. Dollar (USD). Market participants are watching the impact of U.S. Treasury bond buyback plans on the Greenback, while positioning ahead of the release of the U.S. July Personal Consumption Expenditures (PCE) Price Index later on Wednesday and the upcoming Jackson Hole symposium on Friday.

U.S. Treasury Buybacks and Funding Strategy Weigh on the Dollar

U.S. Treasury Secretary Scott Bessent said last week that the U.S. Department of the Treasury will double its bond buyback operations to at least $4 billion per operation, up from the current $2 billion maximum, in an effort to stabilize surging long-term borrowing costs. Concerns over expanded Treasury bond buybacks are emerging as U.S. national debt surpasses $40 trillion, adding downward pressure on the Dollar.

On Tuesday, two senior Treasury officials indicated that the Treasury could use its near $1 trillion General Account to help finance its recently announced plans to increase purchases of government bonds. The prospect of drawing on this cash balance to support buybacks is adding another dimension to the market’s assessment of U.S. fiscal dynamics and their impact on the currency.

BoJ Representation at Jackson Hole and Policy Expectations

The Bank of Japan (BoJ) stated on Wednesday that Governor Kazuo Ueda will not attend the U.S. Federal Reserve’s annual Jackson Hole gathering this week due to a schedule conflict. BoJ board member Naoki Tamura will participate in the event on his behalf.

According to an August 17-24 Reuters poll, 57% of economists expected the BoJ to raise its interest rate in September, marking a sharp shift from views captured in a July survey. A smaller group, 10 of 58 respondents, anticipated a subsequent rate hike to 1.50% in either October or December.

Investor Attention Turns to BoJ Tone Beyond September

Scotiabank strategists noted that, while near-term pricing has already adjusted to expectations for BoJ tightening around the September 18 meeting, “greater risk will center around the central bank’s tone as market participants look beyond the September 18 meeting,” with investors increasingly alert to how policymakers characterize the path of policy thereafter.

Technical Picture: USD/JPY Constrained Below 100-Day SMA

On the daily chart, USD/JPY maintains a bearish near-term structure as spot remains below the 100-day Simple Moving Average (SMA). The pair is trading above the 20-day Bollinger middle band but remains contained by the upper Bollinger band, indicating that recent gains are unfolding within a corrective rebound phase against a backdrop of broader topside fatigue.

The Relative Strength Index (14) stands at 43.64, below the neutral 50 threshold, signaling that recovery attempts lack convincing momentum and that sellers continue to hold the advantage as long as price trades beneath the key moving average barrier.

On the upside, the first notable resistance is located at the 100-day SMA at 160.00. A sustained break above this level would open the way toward the Bollinger upper band around 160.30. On the downside, initial support is seen at the 20-day Bollinger middle band at 158.75, followed by a lower structural area near the Bollinger lower band around 157.20.