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Dollar Index slips to weakest since May as yields rebound

After Treasury liquidity-support buybacks pulled long-end yields down, the 30-year yield later returned above 5.25% and the 10-year stayed above 4.70%, but the Dollar Index kept falling.

Reported · Written up by our desk · Major Pairs

The Dollar Index is trading just below 99.00 and has been marked by a narrow daily range, but it remains at its weakest level since May as US long-end yields have shifted direction this week, according to FXStreet.

FXStreet said the index fell sharply when the Treasury moved to push yields lower, then did not recover when the market pushed rates back up. It cited Wednesday's plan to double liquidity-support buybacks in longer-dated coupons from $2.0 billion per operation to at least $4.0 billion, which knocked about nine basis points off the 30-year and sent the Dollar Index down close to a one-day drop of about a full point.

By Thursday, the long-end bond move had fully reversed, with the 30-year yield back above 5.25% and the 10-year above 4.70%. FXStreet added that both an engineered yield decline and subsequent yield increases are effectively pricing the same risk premium, so the currency is being driven by factors other than the yield level alone.

FXStreet pointed to the macro data backdrop, noting the preliminary August composite Purchasing Managers Index came in at 56 versus 54.5 prior, the strongest reading on the series since April 2022. It said services rose to 56.8 versus a 54 consensus, while manufacturing missed at 53.2 versus 53.9, with goods output at a 13-month low.

Latest closeDollar index 99.64 ▼0.3%

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