WASHINGTON, D.C. / RankWire.AI / – On Thursday, the U.S. dollar hovered close to a three-month low, as yields on long-term Treasury bonds declined. The dollar index was at 98.813 against a basket of six major currencies, approaching its weakest level since mid-May. The euro climbed to $1.1676, marking its highest point since late May. Currency traders also evaluated new measures from the U.S. Treasury and the minutes from the Federal Reserve’s most recent policy meeting.
The Treasury Department announced on Wednesday that it will implement larger liquidity-support buybacks for longer-dated government securities. The maximum size of eligible operations will at least double 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 segments. These enhanced operations are set to start on September 9 and will continue through November 4, coinciding with the end of the current quarterly refunding period.
Following the Treasury’s announcement, long-term bond yields in the U.S. declined. The yield on the 30-year Treasury was approximately 5.184% on Thursday, after experiencing a sharp drop during the previous session. Earlier this week, the yield had reached 5.337%, its highest point since 2007. Changes in Treasury yields influence borrowing costs across financial markets and can impact demand for the dollar. The Treasury Department also indicated that an updated tentative schedule for its buyback operations will be published at a later date.
Weakening dollar bolsters major currencies
The decline in the dollar benefited several leading currencies in Asian trading. The Japanese yen strengthened to around 158.45 per dollar after coming close to the closely watched 160 level. Sterling traded near $1.3604, close to a three-month high. The Swiss franc was near 0.7999 per dollar. The euro also stayed above $1.16, as the dollar index remained below 99. These movements followed a broader slide in the U.S. currency during the previous session.
Minutes from the Federal Reserve’s July 28–29 meeting released Wednesday showed ongoing concerns about inflation. The Federal Open Market Committee maintained its benchmark federal funds rate between 3.5% and 3.75%. Nine members supported keeping the rate unchanged, while three preferred a quarter-point increase. Officials also noted that inflation remains elevated relative to the Fed’s 2% target, even as U.S. economic activity continues to grow at a solid rate.
FOMC minutes highlight inflation concerns
The minutes revealed that several policymakers were prepared to raise interest rates in July. Many participants indicated that higher borrowing costs could be necessary if inflation did not move toward the 2% goal. The Fed continued its policy of maintaining ample reserves in the banking system and rolled over principal payments from Treasury holdings at auction. The central bank’s next scheduled policy gathering will take place on September 15 and 16.
Thursday’s dollar trading reflected the combined effects of lower long-term Treasury yields and the latest signals from U.S. monetary policy. The dollar index remained near its lowest point in about three months. Meanwhile, the 30-year yield stayed below the 19-year high reached earlier this week. The Treasury’s expanded buybacks will commence next month, while the Federal Reserve has kept its policy rate steady. These confirmed developments continue to be central to current trading dynamics in the U.S. dollar and government bond markets.