Dollar Slumps as Treasury Buys Back Long-Dated Bonds

The US dollar weakened to its lowest level since mid-May after the US Treasury Department unexpectedly announced it would increase buybacks of long-dated bonds.

The move, which was seen as a surprise, signaled concern about the bond market selloff and helped fuel a rally in longer-dated Treasuries.

The Bloomberg Dollar Spot Index dropped by 0.7%, with the dollar losing ground against all its major counterparts, including the yen.

The rand strengthened to below R16.08 from R16.25/$ within minutes of the announcement and was trading around R16.10 by late afternoon.

Jane Foley, head of FX strategy at Rabobank, said 'A more settled bond market today has allowed the dollar to fall back.'