Dollar Consolidation Hinges on Rate Cuts, Not Buybacks

The US dollar has been trading in a narrow range against major peers as market participants weigh the Federal Reserve's recent Treasury buyback operations.

Analysts are skeptical about the program's ability to influence long-term currency dynamics, with some calling it 'a technical tool, not a policy shift.'

The Treasury buyback involves the Fed purchasing shorter-dated Treasury securities to smooth market functioning and provide liquidity. However, analysts argue that these measures are unlikely to shift the fundamental drivers of the dollar, such as interest rate differentials and economic growth expectations.

Currency strategists note that the dollar's recent consolidation is more closely tied to expectations for Federal Reserve rate cuts later this year, as well as global risk sentiment. The buyback program, while important for Treasury market stability, is seen as a secondary factor in currency valuation.