Dollar Weakens as Treasury Buybacks Fail to Halt Yield Rise

The US dollar has weakened and is on track for a weekly decline as investors question the effectiveness of the Treasury's move to buy back government bonds. The policy, announced earlier this week, aims to curb the sharp rise in yields, but so far it has only put pressure on the dollar.

US Treasury Secretary Scott Bessent said the government could further increase Treasury buybacks, and that he and White House Budget Director Russell Vought would launch a new effort to consolidate fiscal policy. However, investors are becoming increasingly concerned about worsening US fiscal conditions and the credibility of government institutions.

The euro has risen to near a three-month high at around $1.1685, while sterling is near a six-month high at 1.3643. The US dollar index was on track for a weekly decline of more than 0.8% and was last at 98.82, near a three-month low against six major currencies.

Carol Kong, a foreign exchange strategist at Commonwealth Bank of Australia, said the Treasury's long-term bond buybacks were another example of the US government's use of unconventional tools to control borrowing costs. She noted that the move came as US government debt and fiscal deficits continued to rise, compounded by policy uncertainty.

The 30-year Treasury yield rose around 1.4 basis points to 5.2508%, while the 10-year Treasury yield stood at 4.7041%. Vitali Meschoulam, a strategist at Goldman Sachs, said that history shows such policies can have an impact, at least temporarily, but that the problems facing the US are becoming increasingly fiscal in nature.

Concerns over US government debt, which has surpassed $40 trillion, have prompted some investors to shift into alternative assets such as gold and Bitcoin. Bitcoin rose to its highest level in more than two months on Friday, with a price of $73,823.43 and a weekly gain of around 17%.