Dollar Slumps as Treasury Buyback Plans Weaken Currency

The US dollar fell to a three-month low against major currencies due to concerns that expanded Treasury buybacks of long-dated government debt could further weaken the currency.

Treasury Secretary Scott Bessent signaled potential further expansion of long-term debt buybacks, following a doubling of the operation cap to at least $4 billion per operation starting September 9 through November 4, 2026.

The move aims to rein in high bond yields, but so far, it has had an unintended consequence: undermining the dollar's value.

Analysts say that holding yields down will simply shift the burden of fiscal concerns onto the currency. The market is pushing back against Treasury Secretary Bessent's efforts, with traders citing concerns over a deteriorating fiscal outlook, heavy issuance, geopolitical risk stemming from the war with Iran, and uncertainty over the Federal Reserve's policy path.

As a result, the dollar index fell to its lowest in three months at around 98.8, while the euro reached highs near $1.1711, sterling rallied amid investor skepticism over Treasury and Fed policies, and Bitcoin surged by 6.22% to $77,178.