WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar traded near a three-month low on Thursday as long-term Treasury yields retreated. The dollar index stood at 98.813 against a basket of six major currencies. That placed it near its weakest level since mid-May. The euro rose to $1.1676, its highest level since late May. Currency markets also assessed new U.S. Treasury measures and minutes from the Federal Reserve’s latest policy meeting.
The Treasury Department announced larger liquidity-support buybacks for longer-dated government securities on Wednesday. It will at least double the maximum size of eligible operations from $2 billion to $4 billion. The change covers nominal coupon securities in the 10-year to 20-year and 20-year to 30-year sectors. The larger operations will begin on September 9. They will remain in effect through November 4, the end of the current quarterly refunding period.
Long-term U.S. government bond yields fell following the Treasury announcement. The 30-year Treasury yield was around 5.184% on Thursday after dropping sharply during the previous session. Earlier this week, the yield reached 5.337%, its highest level since 2007. Treasury yields influence borrowing costs across financial markets and can affect demand for the dollar. The Treasury Department said an updated tentative schedule for its buyback operations will be released later.
Dollar weakness lifts major currencies
The weaker dollar supported several major currencies in Asian trading. The Japanese yen strengthened to around 158.45 per dollar after recently approaching the closely watched 160 level. Sterling traded near $1.3604, close to a three-month high. The Swiss franc changed hands near 0.7999 per dollar. The euro also held above $1.16 as the dollar index remained below 99. These moves followed a broader decline in the U.S. currency during the previous session.
Federal Reserve minutes released Wednesday showed continued concern about inflation at the central bank’s July 28 and 29 meeting. The Federal Open Market Committee kept its benchmark federal funds rate between 3.5% and 3.75%. Nine members supported keeping the range unchanged. Three members preferred a quarter-point increase. Officials also noted that inflation remained elevated relative to the Federal Reserve’s 2% goal, while U.S. economic activity continued expanding at a solid pace.
Fed minutes keep inflation in focus
The meeting record showed several policymakers were prepared to raise interest rates in July. Many participants also indicated higher borrowing costs could be needed if inflation failed to move toward the 2% objective. The Federal Reserve maintained its policy of keeping ample reserves in the banking system. It also continued rolling over principal payments from Treasury holdings at auction. The central bank’s next scheduled policy meeting will take place on September 15 and 16.
Dollar trading on Thursday reflected the combination of lower long-term Treasury yields and the latest U.S. monetary policy signals. The dollar index remained close to its lowest level in about three months. Meanwhile, the 30-year yield stayed below the 19-year high reached earlier this week. Treasury’s expanded buybacks will start next month, while the Federal Reserve has left its policy rate unchanged. Those confirmed developments remain central to current trading in the U.S. dollar and government bond markets.