Dollar Slides to Three-Month Low as Treasury Moves to Soothe Bond Market

The US dollar fell to a three-month low on Thursday as the Treasury Department took steps to calm bond market jitters. The dollar index, which measures the dollar against six other currencies, dropped to 98.723, its lowest level since May 14.

ING global head of markets Chris Turner said the Treasury's move to increase buybacks of Treasury securities with maturities between 10 and 30 years should reassure markets that longer-dated bonds are unlikely to face a disorderly selloff.

'It reduces one of those left-field risks out there which is good for risk, good for the investment environment and slightly dollar negative,' Turner said.

Investors have been grappling with a sharp selloff in the global bond market on concern about soaring government debt and higher oil prices. The 30-year Treasury yield rose to a 19-year high of 5.337% earlier this week, but dropped 9 basis points following the Treasury's move.

The dollar weakness provided some relief to the Japanese yen, which traded at 158.41 per dollar, surrendering part of its advance from the previous session. Sterling rose to $1.3631, its highest in three months, while the Swiss franc was slightly weaker at 0.7986 per US dollar.