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Dollar hits lowest level since May after Treasury increases buybacks

The Treasury expanded long-term bond buybacks from $2 billion to $4 billion starting 9 September, a move that pushed Treasury yields lower and weighed on the dollar.

Reported · Written up by our desk · Major Pairs

The US dollar slid to its lowest level since May after the US Treasury decided to raise the size of its long-term bond buybacks, increasing them from $2 billion to $4 billion effective 9 September, Action Forex reports.

The move is linked to lower Treasury yields, with markets focusing on a perceived “pain threshold” level around 5.3% for 30-year bonds, which traders associated with dollar pressure.

Action Forex also argues the dollar drop echoes the way Japan has managed the yen, noting that a wide interest rate differential means the yen is being sold as a funding currency in carry trades, prompting intervention-style responses to limit USDJPY gains.

The analysis ties the broader rates backdrop to policy expectations, pointing to July FOMC minutes that skew hawkish while noting a Citi view that the main cost of the Treasury’s yield-control efforts is a weaker dollar.

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