Dollar Under Pressure: Treasury Intervention, ECB Hawkishness, and Capital Flows Weaken US Currency
The US dollar is under pressure due to several factors, including the Treasury's intervention in the debt market, the ECB's readiness to tighten monetary policy aggressively, and capital flows from the US to Japan.
The Yen has been strengthening as a result of these trends, with USD/JPY falling for five out of the last six days. The US Treasury plans to buy back $6 billion worth of long-term bonds over the next few months, but this move has disappointed investors who were expecting more significant action.
A far more significant factor in the dollar's medium- and long-term weakness could be the repatriation of capital to Japan. With domestic yields rising, Tokyo will be able to keep more money at home, and long-term bond yields at their highest levels since the 1990s risk triggering a process of capital repatriation.