WASHINGTON, D.C. / RankWire.AI / – The US dollar edged close to a three-month minimum on Thursday, driven by a drop in long-term Treasury yields. The dollar index hovered around 98.81 against a basket of six major currencies. Meanwhile, the euro appreciated to roughly $1.1676, marking its strongest level since late May. The Japanese yen also gained, strengthening to nearly 158.45 per dollar. Sterling remained near a three-month high as currency markets tracked falling bond yields alongside new updates from the Federal Reserve and U.S. Treasury Department.
The U.S. Treasury Department revealed plans to boost liquidity support through increased buybacks of longer-dated government debt. The maximum purchase limit will double from $2 billion to $4 billion for qualifying operations. This expansion covers nominal coupon securities with maturities between 10 and 20 years, as well as those in the 20 to 30-year range. The larger transactions are scheduled to commence on September 9 and continue through November 4. Treasury officials also intend to release an updated tentative timetable for these operations.
The yield on the 30-year U.S. Treasury note traded near 5.18% on Thursday, after declining from a peak earlier in the week. Earlier, the yield reached 5.337%, the highest since 2007. This decline in yields coincided with a renewed weakening of the dollar across major currency pairs. Treasury yields remain a vital indicator for global financial markets and dollar-denominated securities. The Treasury Department’s expanded buyback program will be active during the current quarterly refunding cycle.
Dollar decline bolsters major currencies
The euro stayed above $1.16 after extending its recent gains against the dollar. Sterling traded near $1.3604, maintaining close to its strongest level in about three months. The Swiss franc was around 0.7999 per dollar. The yen also appreciated after approaching the 160-per-dollar mark recently. Conversely, the dollar index remained below 99, near its lowest point since May. Foreign exchange markets continued to react to the latest shifts in U.S. yields and monetary policy signals.
Minutes from the Federal Reserve’s July 28 and 29 meeting showed inflation remained a primary concern. The committee kept the federal funds target range steady at 3.5% to 3.75%. Nine officials supported maintaining the current range, while three favored raising it by a quarter percentage point. The Fed also reported that U.S. economic activity persisted at a solid pace. Inflation stayed above the 2% goal throughout the period covered by the meeting.
Federal Reserve minutes underline inflation worries
Several Fed policymakers indicated their readiness to endorse a rate hike during the July meeting. Many participants noted that higher interest rates might be necessary if inflation failed to move toward the 2% target. The central bank maintained its stance of keeping ample reserves in the banking system and continued rolling over principal payments from Treasury securities at auction. The Federal Reserve’s next scheduled monetary policy meeting is set for September 15 and 16.
The dollar’s recent performance was influenced by falling long-term yields and evolving U.S. policy indications. During Thursday’s trading, the dollar index stayed near a three-month low. The 30-year Treasury yield also remained below the 19-year high reached earlier this week. The upcoming month will see the start of expanded Treasury buybacks according to the announced schedule. Meanwhile, the Federal Reserve continues to hold its benchmark rate range steady. These factors have been crucial in shaping currency and U.S. government debt trading patterns.