WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar hovered close to a three-month low on Thursday, driven by a decline in long-term Treasury yields. The dollar index was at 98.813, compared to a basket of six major currencies, indicating its proximity to its weakest point since mid-May. Meanwhile, the euro appreciated to $1.1676, reaching its highest level since late May. Currency traders also evaluated new measures from the U.S. Treasury and reviewed minutes from the Federal Reserve’s recent policy session.
Larger liquidity-support repurchase operations for longer-term government securities were announced by the Treasury Department on Wednesday. The maximum size of eligible buybacks will at least double, increasing from $2 billion to $4 billion. This adjustment applies to nominal coupon securities in the 10-year to 20-year and 20-year to 30-year maturities. These enhanced operations are scheduled to commence on September 9 and will continue through November 4, concluding the current quarterly refunding cycle.
Following the Treasury’s announcement, yields on long-term U.S. government bonds declined. As of Thursday, the 30-year Treasury yield was approximately 5.184%, after experiencing a sharp drop during the previous trading session. Earlier in the week, the yield reached 5.337%, its highest level since 2007. Fluctuations in Treasury yields impact borrowing costs throughout financial markets and can influence the dollar’s demand. The Treasury Department indicated that an updated tentative schedule for the buyback operations will be issued later.
Dollar’s weakness boosts major currencies
The decline of the dollar supported several key currencies in Asian trading. The Japanese yen appreciated to around 158.45 per dollar after recently nearing the significant 160 level. The British pound traded near $1.3604, approaching a three-month high. The Swiss franc was trading close to 0.7999 per dollar, and the euro remained above $1.16 as the dollar index stayed below 99. These movements followed a broader retreat in the U.S. currency during the prior session.
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 maintained its benchmark federal funds rate within the range of 3.5% to 3.75%. Nine members supported holding the rate steady, while three members favored a quarter-point hike. Officials also observed that inflation remained elevated relative to the Fed’s 2% target, though U.S. economic growth continued at a solid pace.
Inflation remains central to Fed policy discussions
The minutes detailed that several policymakers were open to raising interest rates again in July. Many participants suggested that further increases in borrowing costs might be necessary if inflation did not trend toward the 2% goal. The Fed confirmed its approach of maintaining ample reserves in the banking system and continued to rollover principal payments from Treasury holdings at auctions. The central bank’s next scheduled policy meeting will take place on September 15 and 16.
Thursday’s trading reflected a combination of declining long-term Treasury yields and recent signals from U.S. monetary policy. The dollar index stayed close to its lowest point in roughly three months, while the 30-year yield remained below the 19-year high seen earlier this week. The upcoming expanded Treasury buybacks and the Federal Reserve’s unchanged policy rate continue to be key influences on the current movements in the U.S. dollar and government bond markets.