USD Under Pressure as Yields Capped by Expanded Treasury Buybacks
The US Dollar has weakened to its lowest level since May due to expanded Treasury buybacks that have pushed long-end US yields lower.
According to OCBC strategists Sim Moh Siong and Christopher Wong, the USD (i.e. DXY) fell to its weakest level since May after the US Treasury announced larger long-end bond buybacks.
The Treasury will increase the size of its longer-dated buyback operations from $2bn to at least $4bn during the next refunding quarter, from 9 September to 4 November.
This move is seen as a signal that the Treasury is uncomfortable with the rise in long-term yields and aims to restrain further increases in long-end yields in the near term.
The strategists expect restrained yields and a Fed that remains on hold, which will keep the USD under pressure in the near term.