WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar hovered close to a three-month trough on Thursday, driven by declines in long-term Treasury yields. The dollar index hovered around 98.81 against a basket of six major currencies. The euro appreciated to approximately $1.1676, reaching its highest point since late May. The Japanese yen strengthened to nearly 158.45 per dollar, while sterling remained near a three-month peak. Currency markets responded to falling bond yields alongside new insights from the Federal Reserve and U.S. Treasury Department.
The U.S. Treasury Department unveiled plans to boost liquidity-support buybacks for longer-term government bonds. The maximum purchase size will double from $2 billion to $4 billion for eligible operations, covering nominal coupon securities with maturities ranging from 10 to 20 years. It also includes securities with maturities between 20 and 30 years. These increased transactions will commence on September 9 and continue through November 4. Additionally, Treasury officials intend to release an updated tentative schedule for these operations.
On Thursday, the 30-year U.S. Treasury yield traded near 5.18%, after experiencing a decline during the previous session. Earlier in the week, the yield had peaked at 5.337%, marking its highest level since 2007. The pullback in yields coincided with a renewed weakness in the dollar across major currency pairs. Treasury yields serve as a vital indicator for global markets and dollar-denominated securities. The increased buyback program by the U.S. Treasury Department will be active during the current quarterly refunding period.
Dollar decline bolsters major currencies
The euro maintained levels above $1.16 after extending its recent gains against the dollar. Sterling traded near $1.3604 and stayed close to its strongest point in approximately three months. The Swiss franc was around 0.7999 per dollar. Meanwhile, the yen gained ground after approaching the 160-per-dollar mark earlier. The dollar index remained below 99, near its lowest since May. Foreign exchange markets continued to reflect recent movements in U.S. yields and monetary policy data.
Minutes from the Federal Reserve’s July 28 and 29 meetings revealed that inflation remained a key concern. Policymakers kept the federal funds target range steady at 3.5% to 3.75%. Nine officials supported maintaining the current range, while three favored raising it by a quarter percentage point. The Federal Reserve also noted that U.S. economic activity continued to expand at a solid pace, with inflation remaining above its 2% target during the period covered by the meeting.
Federal Reserve minutes emphasize inflation worries
Several Federal Reserve policymakers indicated willingness to support an interest rate hike at the July gathering. Many suggested that higher rates could be necessary if inflation did not move toward the 2% goal. The central bank continued its approach of maintaining ample reserves within the banking system and continued rolling over principal payments from Treasury securities at auction. The Federal Reserve’s next scheduled monetary policy meetings are set for September 15 and 16.
The dollar’s recent performance reflects market reactions to declining long-term yields and updated U.S. policy signals. It remained close to a three-month low on Thursday, with the 30-year Treasury yield staying below the 19-year high reached earlier in the week. The Treasury’s expanded buyback schedule begins in September, while the Federal Reserve maintains its current benchmark rate range. These factors continue to influence currency trading and U.S. government debt markets.