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Dollar slips as DXY tests 98.75 support on debt buyback plan
The US Dollar Index fell nearly 0.9% to a three-month low, after Treasury Secretary Scott Bessent outlined a long-term debt buyback plan aimed at easing bond yields.
The US Dollar weakened on Wednesday after Treasury Secretary Scott Bessent announced a plan to buy back long-term government debt to ease bond yields, putting pressure on the USD Index (DXY), which tracks the dollar against a basket of six major currencies. FXStreet said the DXY dropped nearly 0.9% to test support at the three-month low of 98.75.
Deutsche Bank analyst George Saravelos characterized the initiative as a soft-form financial repression approach designed to contain the long end of the US yield curve, which he said was negative for the dollar. He argued that if the market is not allowed to reprice US Treasuries lower, the adjustment would show up through a weaker dollar for foreign-held Treasuries.
FXStreet noted the move came as hawkish-leaning minutes from the Federal Reserve's July meeting were released, reflecting policymakers' commitment to hike rates in the near term unless inflation pressures ease. The report said the dollar's near-term bias remains bearish, though the Relative Strength Index has reached oversold levels in most timeframes.
On the technical front, FXStreet reported bears have been halted above late May lows around 98.75, with no clear support levels identified below that until the 97.65 to 97.80 area from the April and May range. It added that upside attempts are likely to run into prior support near 99.30, with earlier attempts capped near 99.70 and the recent trading range just above the 100.0 psychological level.