Dollar Slides as US Treasury Announces Aggressive Bond Buybacks

The US dollar has taken a hit due to unexpected fiscal policy moves by the US Treasury Department. In an effort to curb rising Treasury bond yields, the department has pledged to at least double its buybacks of longer-dated government debt. This move is seen as a signal that elevated yields do not accurately reflect underlying economic fundamentals.

Treasury Secretary Scott Bessent indicated that these buybacks could exceed $4 billion. Analysts at ING argue that this focus on supporting the Treasury market is a 'risk-positive story,' with low volatility expected to stay and interest remaining firm in carry trades.

However, the dollar's downside may be constrained by rising safe-haven demand driven by escalating geopolitical tensions in the Middle East. The Swiss National Bank (SNB) has kept its policy rate at 0% and is expected to maintain this stance through 2027, reaffirming its readiness to intervene in foreign exchange markets to curb excessive franc appreciation.