WASHINGTON, D.C. / RankWire.AI / – In New York on Thursday, the US dollar traded close to a three-month low as declines in long-term Treasury yields continued. The dollar index stood 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 examined new measures from the Federal Reserve’s latest policy meeting minutes and developments in U.S. Treasury markets.
On Wednesday, the Treasury Department announced plans for larger liquidity-support buybacks focused on longer-dated government securities. The program will at least double the maximum size of eligible operations from $2 billion to $4 billion. The new schedule will include nominal coupon securities in the 10-year to 20-year and 20-year to 30-year ranges. These expanded operations are set to commence on September 9 and will continue through November 4, coinciding with the end of the current quarterly refunding period.
Following the Treasury’s announcement, yields on long-term U.S. government bonds decreased. The 30-year Treasury yield hovered around 5.184% on Thursday after experiencing a sharp decline from earlier this week when it hit 5.337%, its highest since 2007. These yields impact borrowing costs across financial markets and can influence demand for the dollar. The Treasury Department indicated that an updated tentative schedule for its buyback operations will be issued later.
Weaker dollar boosts major currencies
The decline in the dollar supported several key currencies during Asian trading hours. The Japanese yen appreciated to roughly 158.45 per dollar after recently nearing the closely watched 160 level. The British pound traded near $1.3604, close to a three-month high. The Swiss franc moved near 0.7999 per dollar, while the euro stayed above $1.16 as the dollar index remained below 99. These movements followed a broader decline in the U.S. currency seen during the previous trading session.
Minutes from the Federal Reserve’s July 28-29 meeting, released Wednesday, indicated ongoing concerns about inflation. The Federal Open Market Committee maintained its benchmark federal funds rate within the 3.5% to 3.75% range. Nine members supported holding rates steady, while three favored an increase of a quarter percentage point. Officials also highlighted that inflation levels remain elevated relative to the Fed’s 2% target, even as U.S. economic activity continues to expand at a robust rate.
Federal Reserve Minutes Emphasize Inflation Vigilance
The minutes revealed that several policymakers were prepared to raise interest rates in July, with many indicating that higher borrowing costs might be necessary if inflation did not trend toward the 2% goal. The Fed reiterated its stance of maintaining ample reserves in the banking system and continued rolling over principal payments from Treasury holdings at auction. The next scheduled policy meeting for the central bank’s 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 remained near its lowest point in approximately three months, while the 30-year yield stayed below the 19-year high achieved earlier this week. The upcoming start of the Treasury’s expanded buyback program next month, alongside the Fed’s decision to keep its policy rate unchanged, continues to dominate current trading dynamics in the U.S. dollar and government bond markets.