WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar hovered close to a three-month low on Thursday as long-term Treasury yields declined. The dollar index was at 98.813 against a basket of six major currencies, approaching its weakest point since mid-May. Meanwhile, the euro increased to $1.1676, reaching its highest level since late May. Currency traders also evaluated new measures from the U.S. Treasury and the minutes from the Federal Reserve’s latest policy gathering.
On Wednesday, the Treasury Department announced increased liquidity-support buybacks for longer-term government securities. The size of eligible operations will at least double from $2 billion to $4 billion, covering nominal coupon securities in the 10-year to 20-year and 20-year to 30-year segments. The larger buyback operations are scheduled to commence on September 9 and will continue through November 4, the conclusion 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 roughly 5.184%, after experiencing a sharp drop during the previous trading session. Earlier in the week, yields reached 5.337%, their highest since 2007. These yields influence borrowing costs across financial markets and can impact dollar demand. The Treasury Department also indicated that an updated tentative schedule for its buyback activities would be issued later.
Major currencies gain as dollar weakens
A softer dollar helped bolster several major currencies in Asian trading. The Japanese yen appreciated to around 158.45 per dollar after coming close to the closely watched 160 mark. The British pound traded near $1.3604, close to a three-month high. The Swiss franc was near 0.7999 per dollar, while the euro stayed above $1.16 as the dollar index remained below 99. These currency movements followed a broader decline in the U.S. dollar during the prior session.
Minutes from the Federal Reserve’s July 28 and 29 meetings, released Wednesday, revealed ongoing concerns about inflation. The Federal Open Market Committee decided to keep its benchmark federal funds rate within the 3.5% to 3.75% range. Nine members favored maintaining the current range, while three members called for a quarter-point increase. Officials also emphasized that inflation remained elevated relative to the Fed’s 2% target, even as U.S. economic activity continued expanding at a steady pace.
Inflation remains a focal point in Fed minutes
The minutes indicated that several policymakers were open to raising interest rates in July, with many suggesting that higher borrowing costs might be necessary if inflation did not trend toward the 2% goal. The Fed maintained its policy of holding 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 effects of declining long-term Treasury yields and the latest signals from U.S. monetary policy. The dollar index stayed near its lowest level in roughly three months, while the 30-year yield remained below the 19-year high reached earlier in the week. The upcoming start of expanded Treasury buybacks next month, alongside the Fed’s decision to hold its policy rate steady, continues to be a key driver of current trading activity in the U.S. dollar and government bond markets.