Strong Japanese bonds key mover ahead of awaited US ISM Services PMI

The USD/JPY pair has been higher for three weeks, with the Japanese government taking measures to defend the Japanese currency. The central bank signaled a wider tolerance limit for the benchmark 10-year Japanese Government Bonds from 0.5% to 1.0%, fueling the JGB yields to the highest level since 2014.

The Bank of Japan announced an unscheduled bond-buying of 5-year and 10-year notes with no limits. Japanese Chief Cabinet Secretary Hirokazu Matsuno has repeated his favorite statements suggesting watch on foreign exchange moves and conveying confidence in the BoJ.

The DXY cheered the risk-off mood and benefited from strong US Treasury bond yields. The US ADP Employment Change numbers for July rose past 189K markets forecasts to 324K, adding strength to the dollar.

The US Treasury Department raised possibilities of testing demand for US bonds after the rating cut by fueling the weekly longer-term debt issuance, which propelled bond coupons and the US Dollar. The JPY’s haven status and hawkish concerns about the BoJ propelled the USD/JPY bulls the previous day.