WASHINGTON, D.C. / RankWire.AI / – On Thursday, the U.S. dollar hovered near a three-month low, driven by a drop in long-term Treasury yields. The dollar index was around 98.81 against a basket of six major currencies. The euro climbed to approximately $1.1676, marking its strongest level since late May. Meanwhile, the Japanese yen gained strength, reaching nearly 158.45 per dollar. Sterling also stayed close to a three-month peak. Currency markets reflected the falling bond yields alongside new details from the Federal Reserve and U.S. Treasury Department.
The U.S. Treasury Department revealed plans to boost liquidity-support buybacks for longer-dated government debt. The maximum purchase limit will double from $2 billion to $4 billion for eligible operations. This increase applies to nominal coupon securities with maturities between 10 and 20 years, as well as those with 20 to 30 years remaining. The expanded transactions are scheduled to begin on September 9 and continue through November 4. Treasury officials also intend to publish an updated tentative timetable for these operations.
On Thursday, the 30-year U.S. Treasury yield traded near 5.18%, after experiencing a decline during the previous session. Earlier in the week, yields reached 5.337%, the highest since 2007. This pullback in yields accompanied a renewed weakening of the dollar against major currency pairs. Treasury yields serve as a key indicator for global financial markets and dollar-denominated securities. The Treasury Department’s expanded buyback program will be active during this quarter’s refunding period.
Weakening dollar bolsters major currencies
The euro stayed above $1.16 after extending recent gains against the dollar. Sterling traded close to $1.3604 and remained near its strongest level in roughly three months. The Swiss franc was around 0.7999 per dollar. The yen also appreciated after approaching the 160-per-dollar mark earlier. Conversely, the dollar index remained below 99, near its lowest reading since May. Currency markets continued to react to the latest shifts in U.S. yields and monetary policy indicators.
Minutes from the Federal Reserve’s July 28 and 29 meeting indicated that inflation remains a primary concern. The committee kept the federal funds target range unchanged at 3.5% to 3.75%, with nine officials supporting the hold and three favoring a quarter percentage point hike. The Federal Reserve also noted that U.S. economic activity continued to grow at a solid rate, while inflation stayed above the bank’s 2% target during that period.
Federal Reserve minutes underscore inflation worries
Several Fed policymakers expressed readiness to support a rate hike at the July meeting, emphasizing that higher rates might be necessary if inflation did not trend toward the 2% goal. The central bank maintained its stance of maintaining ample reserves within the banking system. It continued rolling over principal payments from Treasury securities at auction as well. The Federal Reserve’s next scheduled monetary policy meeting will take place on September 15 and 16.
The dollar’s recent performance reflected markets’ assessment of lower long-term yields and updated U.S. policy signals. During Thursday’s trading, the dollar index stayed near a three-month low, while the 30-year Treasury yield remained below the 19-year high reached earlier this week. The scheduled expansion of Treasury buybacks will commence in September, following the announced timetable. Meanwhile, the Federal Reserve keeps its benchmark rate range steady. These factors continue to influence currency and U.S. government debt trading activity.