Dollar Plunges as Treasury Intervenes in Bond Market Rout
The US dollar has dropped to three-month lows due to the Treasury Department's efforts to calm the bond market. The move, which involves doubling liquidity support buyback operations for longer-dated bonds, aims to ease pressure on long-term yields without expanding the Federal Reserve's balance sheet.
On Wednesday, the 30-year Treasury yield peaked at a 19-year high of 5.337%, prompting the Treasury to intervene. The move effectively shifts more government borrowing towards short-term bills while buying back longer-dated debt.
Analysts believe this will help stabilize the bond market without the need for Federal Reserve intervention, but it may complicate monetary policy work. The dollar's weakness has provided some relief to the Japanese yen, which pulled away from the 160 level.