Treasury Buybacks Slam Dollar Below 99
The US dollar took a hit as it broke below the 99.00 support level, reaching as low as 98.50 for the first time since mid-May.
This decline is attributed to the Treasury's plan to buy back larger amounts of older, less-liquid long-dated government bonds, which aims to bolster liquidity and manage the debt profile without implementing quantitative easing (QE).
The initial market response saw demand for longer-dated bonds rise while yields fell, weighing on the currency. The move also resurfaced fiscal concerns, with the dollar's reaction running through lower long-term yields and shifting risk premia.
According to CFTC data, net speculative dollar positioning decreased by nearly 1.1K contracts to about 21.4K, with exposure at 43.21%, and percentiles at 66.6 and 73.9.