Dollar Tumbles Near Three-Month Lows Amid Treasury Bond Support Plans
The US dollar has been struggling to recover from its recent losses, hovering near three-month lows as investors react to measures announced by the U.S. Treasury Department. The dollar index, which measures the currency against six other units, was at 98.938 on Thursday, its lowest level since mid-May.
Long-term bond yields in the US had hit their highest levels since 2007, prompting the Treasury's announcement to double liquidity support buyback operations for longer-dated bonds. The move aims to calm the bond market and reduce downward pressure on long-term yields without expanding the Federal Reserve's balance sheet.
Tony Sycamore, a market analyst at IG, described the Treasury's plan as 'a clear signal that Washington is prepared to lean against rising term premia.' Brian Jacobsen, chief economic strategist at Annex Wealth Management, warned that this move was only temporary and indicated an era of fiscal dominance and modern monetization.
The move by the Treasury comes amid growing concern about inflation at the Federal Reserve. Minutes from its last meeting showed several policymakers were ready to raise interest rates if inflation did not decline to the central bank's 2% target.