WASHINGTON, D.C. / RankWire.AI / – On Thursday, the U.S. dollar hovered near a three-month low as Treasury yields on long-term bonds declined. The dollar index was around 98.81 against a basket of six main currencies. The euro appreciated to approximately $1.1676, reaching its strongest point since late May. Meanwhile, the yen strengthened to roughly 158.45 per dollar. Market participants also digested new measures in the Treasury market and details from the Federal Reserve’s latest policy meeting.
The Treasury Department revealed plans for larger liquidity-support buybacks involving longer-dated U.S. government securities. The maximum purchase size for eligible operations will be increased from $2 billion to $4 billion. This change affects nominal coupon securities in the 10-year to 20-year and 20-year to 30-year segments. The expanded buyback operations are set to commence on September 9 and will run through November 4, concluding the current quarterly refunding period.
The announcement coincided with a notable drop in long-term government bond yields, with the 30-year Treasury yield near 5.18% on Thursday after having fallen during the previous session. Earlier in the week, it hit 5.337%, the highest since 2007. Lower yields on Treasuries can diminish the relative returns on dollar-denominated debt. An updated tentative schedule for the increased buyback operations is expected to be released by the Treasury Department soon.
Major currencies strengthen versus the dollar
As the dollar index stayed below the 99 mark, several leading currencies gained ground. The pound traded near $1.3604, close to its strongest level in three months. The Swiss franc traded at about 0.7999 per dollar. The euro maintained its position above $1.16 after gains carried over from the previous session. The yen also drew attention after approaching the 160-per-dollar level, a threshold monitored by traders.
Minutes from the Federal Reserve’s July 28 and 29 meeting revealed ongoing worries about high inflation. Policy makers kept the federal funds target range unchanged at 3.5% to 3.75%. Nine officials supported holding rates steady, while three preferred a quarter-point hike. The Fed noted that economic activity continued expanding at a healthy rate, and officials also observed that inflation was still above the central bank’s 2% goal.
Minutes highlight ongoing interest rate considerations
The record from the meeting showed that several policymakers were inclined to support higher interest rates in July. Many officials indicated that tighter policy could become necessary if inflation did not move toward the 2% target. The central bank also continued its approach of managing reserves by rolling over principal payments from Treasury securities at auction. The Federal Reserve’s next scheduled policy meeting is set for September 15 and 16.
The recent decline of the dollar occurred alongside falling bond yields and market assessments of the revised U.S. policy outlook. The dollar index stayed near levels seen in May, while the 30-year Treasury yield remained below the 19-year high touched earlier this week. The upcoming expansion of Treasury buybacks in September and the unchanged interest rate range have continued to influence trading in the foreign exchange and U.S. bond markets on Thursday.