WASHINGTON, D.C. / RankWire.AI / – The US dollar hovered close to a three-month low on Thursday, as long-term Treasury yields declined. The dollar index was around 98.81 against a basket of six major currencies. The euro rose to approximately $1.1676, reaching its highest point since late May. Meanwhile, the yen appreciated to roughly 158.45 per dollar. Investors also absorbed new measures in the Treasury market and details from the Federal Reserve’s latest policy meeting.
The Treasury Department announced an increase in liquidity-support buybacks for longer-dated US government securities. Maximum purchase amounts will rise from $2 billion to $4 billion for eligible operations. This change applies to nominal coupon securities in the 10-year to 20-year and 20-year to 30-year sectors. The expanded operations will commence on September 9 and run through November 4, marking the conclusion of the current quarterly refunding period.
The announcement coincided with a notable decline in long-term government bond yields. On Thursday, the 30-year Treasury yield was near 5.18%, after falling in the previous session. Earlier in the week, it hit 5.337%, the highest since 2007. Lower Treasury yields can diminish the relative return on dollar-denominated debt. The Treasury Department intends to publish an updated tentative schedule for the expanded buyback operations.
Major currencies strengthen against the dollar
A number of key currencies appreciated as the dollar index stayed below 99. The pound sterling traded close to $1.3604, near its strongest level in three months. The Swiss franc was around 0.7999 per dollar. The euro remained above $1.16, extending gains from the previous session. Currency markets also monitored the yen, which recently approached the 160-per-dollar mark that traders are watching closely.
Minutes from the Federal Reserve’s July 28 and 29 meeting indicated ongoing concerns about high inflation. Policymakers maintained the federal funds target range at 3.5% to 3.75%. Nine officials supported keeping rates unchanged, while three favored a quarter-point hike. The Federal Reserve noted that economic activity continued to expand at a solid rate and highlighted that inflation still remained above its 2% goal.
Highlights from the Fed meeting reveal debate over interest rates
The meeting record showed that several policymakers were inclined to support higher interest rates in July. Many participants emphasized that tighter policy could become necessary if inflation did not move toward the 2% target. The central bank also maintained its stance on reserves in the banking system, continuing to roll over principal payments from Treasury securities at auction. The Federal Reserve’s upcoming policy session is scheduled for September 15 and 16.
The recent decline in the dollar occurred as bond yields retreated and markets digested the updated US policy outlook. The dollar index stayed close to levels last seen in May, while the 30-year Treasury yield remained below the 19-year high reached earlier this week. Expanded Treasury buybacks are set to commence in September, with the current interest-rate range remaining unchanged. These confirmed developments kept influencing trading in the foreign exchange and US government bond markets throughout Thursday.