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Dollar extends losses to weakest level since mid-June after buyback

Scotiabank links the selloff to the Treasury decision to double bond buybacks, a move that targets longer-term rates and is scheduled from September 9 to November 4.

Reported · Written up by our desk · Major Pairs

The US dollar is extending its slide to its weakest level since mid-June as markets digest a US Treasury decision to double bond buybacks, according to FXStreet citing Scotiabank strategists Shaun Osborne and Eric Theoret.

Scotiabank says the plan is intended to manage longer-term yields amid lingering doubts about the Federal Reserve’s inflation resolve and concerns around US fiscal sustainability, with the US Dollar Index expected to fall another 1 to 1.5% in the near term.

The strategists noted that the announcement came just two weeks after the latest quarterly refunding and shortly before a 20-year Treasury auction, with buybacks rising from $2 billion to $4 billion.

Scotiabank also pointed to policy uncertainty around the Fed, referencing that July FOMC minutes showed many policymakers favored tighter conditions if inflation did not decline, while recent signals of cooling inflation suggest the risk of a September rate hike remains lower than market-implied odds of just over 30%.

Latest closeDollar index 99.64 ▼0.3%

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