WASHINGTON, D.C. / RankWire.AI / – Amidst a broader market assessment of U.S. economic signals and monetary policy, the dollar remained close to its three-month low on Thursday, primarily due to retreating long-term Treasury yields. The dollar index was recorded at 98.813 against a basket of six key currencies, approaching its weakest level since mid-May. Meanwhile, the euro increased to $1.1676, reaching a peak not seen since late May. Currency traders also analyzed new measures from the U.S. Treasury and the minutes from the Federal Reserve’s latest policy meeting.
On Wednesday, the Treasury Department announced plans to expand liquidity-support buybacks for longer-term government securities. The maximum size of eligible operations will at least double from $2 billion to $4 billion. This change applies to nominal coupon securities in the 10-year to 20-year and 20-year to 30-year maturity ranges. The increased operations are scheduled to commence on September 9 and will continue through November 4, marking the end of the current quarterly refunding period.
Following the Treasury’s announcement, yields on long-term U.S. government bonds declined. The 30-year Treasury yield was approximately 5.184% on Thursday, after experiencing a sharp decrease during the previous session. Earlier this week, the yield reached 5.337%, its highest point since 2007. Treasury yields play a significant role in determining borrowing costs across financial markets and can influence demand for the dollar. The Treasury Department also indicated that an updated tentative schedule for buyback operations will be issued later.
Weakening dollar bolsters major currencies
A softer dollar supported several prominent currencies during Asian trading hours. The Japanese yen appreciated to approximately 158.45 per dollar after nearing the closely watched 160 level. The British pound traded near $1.3604, close to its three-month peak. The Swiss franc moved around 0.7999 per dollar, while the euro maintained a position above $1.16 as the dollar index stayed below 99. These movements followed a broad decline in the U.S. currency observed in the previous session.
Minutes from the Federal Reserve’s July 28 and 29 meeting, released on Wednesday, revealed ongoing concerns about inflation within the central bank. The Federal Open Market Committee decided to hold its benchmark federal funds rate between 3.5% and 3.75%. Nine members supported keeping the rate unchanged, while three members favored a quarter-point increase. Officials highlighted that inflation remains elevated compared to the Fed’s 2% target, even as U.S. economic activity continues to expand at a healthy rate.
Inflation concerns persist as Fed minutes highlight potential rate hikes
The minutes from the meeting indicated that several policymakers were inclined to raise interest rates in July, with many suggesting that higher borrowing costs could be necessary if inflation did not approach the 2% goal. The Federal Reserve continued its policy of maintaining ample reserves in the banking system and rolled over principal payments from Treasury holdings at auction. The upcoming central bank’s policy meeting is scheduled for September 15 and 16.
Thursday’s trading in the dollar reflected the combined influence of lower long-term Treasury yields and recent signals from U.S. monetary policy. The dollar index stayed near its three-month lows, while the 30-year yield remained below the 19-year high reached earlier this week. The Treasury’s expanded buyback programs will begin next month, and the Federal Reserve has maintained its policy rate at the current level. These developments continue to be key factors shaping trading dynamics in the U.S. dollar and government bond markets.