Treasury Buyback Surprise Triggers Dollar Rout
The US Treasury's surprise announcement of doubling its long-dated buyback operations has sent markets into a frenzy, with the dollar tumbling to a three-month low. The unexpected move, which will see the maximum cap raised to $4 billion through early November, overshadowed the release of Federal Open Market Committee (FOMC) minutes that were expected to be the day's main event.
The hawkish tone of the FOMC minutes was not enough to counteract the Treasury's yield-suppressing buyback expansion, which dragged down the dollar despite the euro making notable gains. The greenback fell in tandem with the EUR/USD pair breaking decisively out of its recent 1.15-1.16 range and rallying almost a percent to fresh three-month highs just shy of 1.17.
The dollar's weakness was not limited to the EUR/USD pair, as the British pound also climbed to trade around 1.36 against the dollar, although this was largely due to dollar-weakness rather than any specific boost to the pound itself. The Canadian dollar extended its recent outperformance, falling around half a percent and threatening 1.38 overnight.
Analysts remain cautious on chasing the euro's move higher from here, citing European prices continuing to climb on fears of supply disruption stemming from Middle East hostilities, as well as the bloc's energy import bill remaining a structural constraint on euro upside.