Yen Retreats as Japan Trade Deficit Widens Amid US Debt Uncertainty

The Japanese Yen has trimmed its gains on Friday, despite the overall weakness of the US Dollar. The USD/JPY pair is trading at 158.60 ahead of the US session opening.

This comes after a broad-based US Dollar decline following the US Treasury's plan to double buybacks of long-term Government debt. The move aims to ease pressure on US long-term Government Bonds, with the yield on the 30-year note hitting a 19-year high of 5.33% earlier this week.

Data released by Japan's Ministry of Finance revealed that the country's trade deficit increased to JPY634.5 billion in July, from the JPY409 billion shortfall recorded in June. A 27.8% increase in imports is the main reason for the growing trade gap, as higher energy and semiconductor prices boosted costs.

FX strategists at UOB note that any decline in USD/JPY should be contained within a 156.60/159.60 range, as the downward momentum is starting to build but remains insufficient for a sustained decline.