WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar remained close to a three-month low on Thursday, driven by a decline in long-term Treasury yields. The dollar index hovered around 98.81 against a basket of six major currencies. Meanwhile, the euro increased to approximately $1.1676, reaching its highest point since late May. The yen also strengthened to about 158.45 per dollar. Investors continued to process new Treasury market measures and details from the Federal Reserve’s latest policy meeting.
The Treasury Department announced an increase in liquidity-support buybacks for longer-dated U.S. government securities. The maximum purchase amounts will rise from $2 billion to $4 billion for eligible operations. This change affects nominal coupon securities in the 10-year to 20-year and 20-year to 30-year categories. The expanded buyback operations are set to commence on September 9 and will run through November 4, marking the end of the current quarterly refunding period.
The announcement came amid a significant decline in long-term government bond yields. The 30-year Treasury yield was near 5.18% on Thursday after experiencing a fall during the previous session. Earlier this week, it peaked at 5.337%, the highest level since 2007. The decrease in Treasury yields can diminish the relative return on dollar-denominated debt. The Treasury Department intends to publish a revised tentative schedule for the larger buyback operations.
Major currencies appreciate against the dollar
A number of key currencies gained strength as the dollar index stayed below the 99 mark. The British pound traded near $1.3604, approaching its strongest level in three months. The Swiss franc was around 0.7999 per dollar. The euro maintained its position above $1.16 after extending gains from the previous session. Currency markets also followed the yen, which recently moved close to the 160-per-dollar threshold that market participants are monitoring.
Minutes from the Federal Reserve’s July 28 and 29 meeting revealed ongoing concerns about persistent inflation. Policymakers kept the federal funds target range steady at 3.5% to 3.75%. Nine officials supported holding rates, while three favored a quarter-point hike. The Federal Reserve noted that economic activity was still expanding at a solid pace and observed that inflation remained above its 2% target.
Federal Reserve minutes underscore debate over interest rate trajectory
The minutes indicated that several policymakers were ready to support higher interest rates in July. Many participants suggested that more restrictive policy might be necessary if inflation did not move toward the 2% goal. The central bank also maintained its approach regarding reserves in the banking system, continuing to roll over principal payments from Treasury securities at auction. The Federal Reserve’s next scheduled policy meeting will take place on September 15 and 16.
The recent dip in the dollar was fueled by falling bond yields and market assessments of the updated U.S. policy outlook. The dollar index stayed near levels last seen in May, while the 30-year Treasury yield remained below the 19-year high reached earlier this week. The planned expansion of Treasury buybacks beginning in September, alongside an unchanged benchmark interest-rate range, continued to influence trading in foreign exchange and U.S. government bond markets on Thursday.