Unintended spillover from US bond operations pushed USD/JPY down 0.92%, its largest drop since early-August intervention.
USD/JPY fell 0.92% to just above 158.00 on Wednesday, marking its steepest decline since Japan’s last currency intervention in early August. The move occurred without Tokyo’s involvement, driven instead by the US Treasury’s announcement to double liquidity support buybacks in longer-dated bonds to at least 4 billion Dollars per operation, up from 2 billion, starting September 9 through November 4.
The thirty-year Treasury yield retreated from a 17-year high above 5.33% on August 18, easing nearly 10 basis points during the session. Japan’s policy rate remains at 1.00%, far below the US federal funds rate range of 3.50% to 3.75%, making USD/JPY highly sensitive to yield differentials. Past interventions, including a record 8.45 trillion Yen joint operation, provided only temporary relief, with gains often reversed within weeks.
The Yen’s rally followed a bond notice targeting the 20-year sector, which erased over 100 pips from USD/JPY in two hours. The pair settled near its 200-day exponential moving average, underscoring the broader impact of US monetary operations on global currency markets.