WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar hovered near a three-month low on Thursday as a result of declining long-term Treasury yields, with the dollar index trading around 98.81 against a basket of six major currencies. Meanwhile, the euro appreciated to approximately $1.1676, marking its highest point since late May, and the Japanese yen strengthened to nearly 158.45 per dollar. Sterling also stayed close to a three-month peak. These currency market movements coincided with falling bond yields and new insights from the Federal Reserve and U.S. Treasury Department.
In a move to support liquidity, the U.S. Treasury Department announced an increase in the amount of buybacks for longer-term government debt. The maximum purchase amount will double, rising from $2 billion to $4 billion for eligible operations, which include nominal coupon securities with maturities between 10 and 20 years, as well as those between 20 and 30 years. These larger transactions will commence on September 9 and continue through November 4, with treasury officials planning to publish an updated tentative schedule for the operations.
After falling during the prior session, the 30-year U.S. Treasury yield traded close to 5.18% on Thursday, having earlier reached 5.337%, its highest level since 2007. The decline in yields was accompanied by a renewed weakening of the dollar across major currency pairs. Treasury yields remain a key indicator for global financial markets and dollar-denominated securities, and the expanded buyback program by the U.S. Treasury Department will be active during the ongoing quarterly refunding period.
Declining dollar bolsters major currencies
The euro stayed above $1.16, extending its recent gains against the U.S. dollar. Sterling traded near $1.3604 and continued to hover around its highest level in about three months. The Swiss franc was around 0.7999 per dollar. The Japanese yen also appreciated after nearing the 160-per-dollar mark recently. In contrast, the dollar index remained below 99, approaching its weakest point since May. Currency markets continued to respond to the latest shifts in U.S. yields and monetary policy data.
Minutes from the Federal Reserve’s July 28 and 29 meetings revealed that inflation remained a primary concern for policymakers. The committee decided to keep the federal funds target range unchanged at 3.5% to 3.75%, with nine officials supporting the decision to maintain the current range and three favoring a quarter percentage point increase. The Fed also reported that U.S. economic activity persisted in expanding at a solid pace, and inflation remained above the central bank’s 2% objective during the period covered by the meeting.
Federal Reserve minutes underscore inflation worries
Several members of the Federal Reserve indicated they were ready to support a rate hike during the July gathering, with many suggesting that higher rates could be necessary if inflation did not move closer to the 2% target. Meanwhile, the central bank maintained its stance of holding substantial reserves within 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 recent dollar performance reflects markets’ evaluation of lower long-term yields and updated U.S. policy signals. Throughout 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 in the week. Treasury buybacks will expand starting in September according to the announced schedule, and the Federal Reserve continues to hold its benchmark rate range steady. These factors remain central to currency and U.S. government debt trading activities.