WASHINGTON, D.C. / RankWire.AI / – On Thursday, the US dollar hovered close to its lowest point in three months as yields on long-term Treasuries declined. The dollar index stood at 98.813 against a basket of six key currencies, marking a level not seen since mid-May. Meanwhile, the euro appreciated to $1.1676, reaching its highest since late May. Currency traders also evaluated new US Treasury measures alongside the minutes from the Federal Reserve’s latest policy session.
The Treasury Department revealed plans for increased liquidity support buybacks on Wednesday, targeting longer-dated government bonds. The program will at least double its maximum size from $2 billion to $4 billion, covering nominal coupon securities in the 10-year to 20-year and 20-year to 30-year ranges. These enhanced operations are scheduled to commence on September 9 and run through November 4, coinciding with the current quarterly refunding period.
Following this announcement, yields on long-term US government bonds decreased. The 30-year Treasury yield was approximately 5.184% on Thursday after a sharp decline during the prior session, with a peak of 5.337% earlier this week—the highest since 2007. Such yields influence borrowing costs and can impact demand for the dollar. The Treasury also indicated that an updated schedule for buyback operations will be issued later.
Weakening dollar supports major global currencies
The decline of the dollar buoyed several key currencies in Asian markets. The Japanese yen strengthened to roughly 158.45 per dollar after nearing the significant 160 level. The pound traded near $1.3604, approaching a three-month high, and the Swiss franc moved close to 0.7999 per dollar. The euro remained above $1.16 as the dollar index stayed below 99, reflecting a broader weakness in the US currency seen in the previous trading session.
Minutes from the Federal Reserve’s July 28–29 meeting, released Wednesday, indicated ongoing concern about inflation. The committee maintained its benchmark federal funds rate in the 3.5% to 3.75% range, with nine members supporting the status quo and three favoring a quarter-point increase. Officials highlighted that inflation remains above the Fed’s 2% target, even as US economic activity continues at a robust rate.
Federal Reserve Minutes Highlight Inflation Concerns
The minutes revealed many policymakers were open to raising interest rates in July, with some suggesting additional hikes might be necessary if inflation does not trend toward the 2% goal. The Fed also reaffirmed its policy of maintaining ample reserves in the banking system and continuing to roll over Treasury principal payments at auctions. The upcoming central bank’s policy meeting is scheduled for September 15 and 16.
Thursday’s dollar performance reflected the combined influence of declining long-term Treasury yields and the latest signals from US monetary policy. The dollar index remained near a three-month low, while the 30-year yield stayed below the 19-year high recorded earlier this week. The upcoming expanded buyback program by the Treasury, set for next month, along with the Fed’s decision to hold rates steady, continues to shape the current dynamics in US dollar and government bond markets.