DXY Slumps as Treasury Bond Buybacks Boost Liquidity

The US Dollar Index (DXY) has been trading near its three-month range bottom at around 99.00, despite the fact that it should be experiencing a price increase by December due to the Federal Reserve's actions.

A key factor in this is the Treasury's long-end bond buyback program, which was announced in mid-August and has since led to a decrease in the Dollar Index below its 200-day Exponential Moving Average (EMA) of around 99.50.

The Treasury General Account (TGA), the government's operating balance at the Federal Reserve, stands near $950 billion, which is significantly higher than the previous administration's working level of $550 to $600 billion.

This increased liquidity has led to a situation where the Dollar Index is trading similarly to a rate cut, without any actual change in interest rates. The policy rate remains at 3.50% to 3.75%, while the quantity of Dollars in the system rises.