WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar hovered close to a three-month low on Thursday as yields on long-term Treasuries eased. The dollar index was at 98.813 against a basket of six major currencies, approaching its lowest point since mid-May. Meanwhile, the euro increased to $1.1676, reaching its highest level since late May. Currency markets also evaluated new measures from the Federal Reserve’s latest policy meeting minutes along with recent developments.
The Treasury Department announced plans on Wednesday to increase liquidity-support buybacks for longer-dated government securities. This initiative will at minimum double the maximum size of qualifying operations from $2 billion to $4 billion. The scope now includes nominal coupon securities in the 10-year to 20-year and 20-year to 30-year ranges. The larger-scale buybacks will commence on September 9 and remain active through November 4, marking the end of the current quarterly refunding period.
Following the Treasury’s announcement, long-term U.S. government bond yields declined. As of Thursday, the 30-year Treasury yield was approximately 5.184%, having fallen sharply during the previous session. Earlier in the week, it hit 5.337%, the highest since 2007. Fluctuations in Treasury yields impact borrowing costs across financial markets and influence demand for the dollar. The Treasury Department indicated that an updated tentative schedule for its buyback operations will be issued later.
Decline in the dollar supports major currencies
As the dollar weakened, several leading currencies gained strength in Asian trading. The Japanese yen climbed to around 158.45 per dollar after recently nearing the closely watched 160 mark. Sterling traded near $1.3604, close to a three-month high. The Swiss franc moved close to 0.7999 per dollar, while the euro maintained levels above $1.16 as the dollar index stayed below 99. These movements came after a broader decline in the U.S. currency during the previous session.
The minutes from the Federal Reserve’s July 28-29 meeting released Wednesday revealed ongoing concerns about inflation within the central bank. The Federal Open Market Committee chose to keep its benchmark federal funds rate between 3.5% and 3.75%. Nine members supported maintaining the current range, while three members favored a quarter-point increase. Officials also highlighted that inflation remained above the Fed’s 2% target, even as U.S. economic activity continued to expand at a healthy rate.
Inflation remains a key focus in Fed minutes
The record of the meeting indicated that several policymakers were open to raising interest rates in July. Many also suggested that higher borrowing costs might be necessary if inflation did not trend toward the 2% goal. The Federal Reserve persisted in its strategy of maintaining ample reserves within the banking system and continued rolling over principal payments from Treasury holdings at auction. The central bank’s next scheduled policy meeting is set for September 15 and 16.
Thursday’s dollar trading reflected the combined impact of declining long-term Treasury yields and the latest signals from U.S. monetary policy. The dollar index lingered near its lowest point in approximately three months. Meanwhile, the 30-year Treasury yield remained below the 19-year high achieved earlier this week. The expanded Treasury buyback programs are set to begin next month, alongside the Federal Reserve’s decision to keep its policy rate unchanged. These developments continue to shape current trading dynamics in the U.S. dollar and government bond markets.