The US dollar has come under moderate pressure as long-term US Treasury yields decline. Adding to the move, the US Treasury Department has decided to expand its buyback operations for securities with maturities of 10 to 30 years in an effort to support market liquidity. Against this backdrop, the 30-year Treasury yield fell by around 9 basis points to 5.19%.

The drop in yields has weakened one of the key sources of support for the dollar and has proved particularly significant for USD/JPY, a pair that remains highly sensitive to movements in the US bond market. The link runs through interest-rate differentials, a core driver of exchange rates: with US rates above those of most other major economies, higher-yielding Treasuries have attracted global capital, and falling yields erode that pull.

The recently released FOMC minutes provided a counterweight. They revealed growing concern among policymakers about inflation risks, with several officials favouring a rate hike as early as the July meeting — a detail that kept the overall tone relatively hawkish. Although policymakers were divided over whether an immediate rate increase was necessary, inflation risks remain a central concern for the Federal Reserve, and future decisions will continue to depend on incoming economic data.

Today, markets will focus on a fresh batch of US economic figures. The Philadelphia Fed Manufacturing Index, one of the first regional factory surveys released each month, is expected to fall to 24.1 from 41.4, while initial jobless claims, the timeliest weekly read on the US labour market, are forecast at 210,000. Weaker-than-expected figures could put additional pressure on the dollar, whereas resilient data may allow the currency to recover some of its recent losses.

For the Canadian dollar, commodity-price data will provide an additional catalyst. The Raw Materials Price Index (RMPI) is expected to decline by 1.8% following a 6.9% drop in the previous month, making the actual reading potentially important for the further direction of USD/CAD. Canada's status as a major exporter of raw materials, energy above all, is one reason resource-linked price data can move the currency.

USD/JPY

USD/JPY made several unsuccessful attempts to approach the key 160.00 resistance level before retreating sharply towards 158.00 as US Treasury yields declined. The pair effectively trades as a proxy for the interest-rate gap between the Federal Reserve and the Bank of Japan, whose policy stance has remained far looser than that of other developed-market central banks — one reason the yen is so sensitive to swings in US yields. Moves toward 160.00 also carry more than technical significance: Japanese authorities have intervened repeatedly in recent years to counter yen weakness at successive multi-decade highs for the pair.

If selling pressure on the dollar persists, the pair could move towards the 156.70–157.20 area. At the same time, a corrective rebound following yesterday's decline could lift the pair towards 158.60–159.20.

Key events for USD/JPY:

• Today at 15:30 (GMT+3): Philadelphia Fed Manufacturing Index
• Today at 15:30 (GMT+3): US initial jobless claims
• Tomorrow at 02:30 (GMT+3): Japan national core Consumer Price Index (CPI)

Japan's core CPI is a key inflation gauge for the Bank of Japan, which shifted away from negative rates earlier in the year.

USD/CAD

USD/CAD remains in a broader downtrend that took shape after the formation of a “tower” pattern in early July. Yesterday, sellers tested the important 1.3800 support level. The pair is also trading against a backdrop of policy divergence: the Bank of Canada delivered a rate cut in June, easing ahead of the Federal Reserve, whose latest minutes showed officials still weighing the case for a further hike.

A sustained break below yesterday's low could open the way towards 1.3730–1.3760. If 1.3800 continues to hold as support, however, the pair could stage a recovery towards 1.3840–1.3870.

Key events for USD/CAD:

• Today at 15:30 (GMT+3): Canadian Raw Materials Price Index (RMPI)
• Today at 17:00 (GMT+3): US Leading Economic Indicators
• Tomorrow at 15:30 (GMT+3): Canadian core retail sales

Outlook

USD/JPY and USD/CAD remain caught between opposing fundamental forces. Falling Treasury yields are weighing on the dollar, while the relatively hawkish tone of the FOMC minutes is limiting the scope for a deeper decline.

Market attention is now turning to the latest US economic data. Weaker figures could extend the dollar's correction and increase downside pressure on USD/JPY and USD/CAD, while stronger-than-expected releases could restore support for the US currency and trigger a recovery in both pairs.