WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar hovered near a three-month low on Thursday as Treasury yields on long-term bonds declined. The dollar index fluctuated around 98.81 against a basket of six major currencies. The euro appreciated to approximately $1.1676, reaching its highest point since late May. Meanwhile, the yen gained strength, trading roughly at 158.45 per dollar. Market participants also digested new measures in the Treasury market along with insights from the Federal Reserve’s latest policy deliberations.
The Treasury Department disclosed plans for increased liquidity-support buybacks on longer-dated U.S. government securities. These operations will now have a maximum purchase size of $4 billion, up from $2 billion for eligible transactions. This change applies to nominal coupon securities in the 10-year to 20-year and 20-year to 30-year segments. The expanded buyback activities are set to commence on September 9 and will continue through November 4, ending the current quarterly refunding cycle.
This announcement coincided with a notable decline in long-term government bond yields, with the 30-year Treasury yield near 5.18% on Thursday after experiencing a dip during the previous session. Earlier in the week, it had hit 5.337%, marking the highest level since 2007. Falling Treasury yields can diminish the relative return on dollar-denominated debt instruments. The Treasury Department is expected to release an updated tentative schedule for the larger buyback operations.
Major currencies strengthen against the dollar
As the dollar index remained below 99, several key currencies gained ground. The British pound traded near $1.3604, close to its three-month peak. The Swiss franc was around 0.7999 per dollar. The euro maintained gains above $1.16 after advancing in the previous session. Currency traders also watched the yen, which recently neared the 160-per-dollar level, a threshold closely monitored by market participants.
Minutes from the Federal Reserve’s July 28 and 29 meeting revealed ongoing concerns about persistent inflation. The committee maintained the federal funds target range at 3.5% to 3.75%. Nine officials favored holding rates steady, while three preferred a quarter-point hike. The Fed noted that economic activity was still expanding at a solid pace and acknowledged that inflation remained above the central bank’s 2% goal.
Meeting minutes show rate hike considerations
The minutes indicated that several policymakers were open to supporting higher interest rates in July. Many suggested that a tighter policy stance might be necessary if inflation did not approach the 2% target. The central bank continued its approach regarding banking system reserves, rolling over principal payments from Treasury securities at auction. The Fed’s upcoming policy meeting is scheduled for September 15 and 16.
The recent decline of the dollar was driven by falling bond yields and market evaluations of the updated U.S. policy stance. The dollar index stayed near levels last seen in May, while the 30-year Treasury yield remained below the 19-year high reached earlier this week. The expanded Treasury buyback programs will start in September, with the current interest-rate range remaining unchanged. These developments continued to influence trading across the foreign exchange and U.S. government bond markets on Thursday.