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Dollar rebounds after Treasury doubles 10- to 30-year buybacks
The dollar index rose 0.06% to 98.89 as yields resumed their climb, while the euro slipped and the yen weakened further after the Wednesday buyback announcement.
The U.S. dollar rebounded from earlier losses on Thursday as traders assessed whether Treasury efforts to restrain longer-term yields will work, according to Reuters via LiveMint Markets. The Treasury said on Wednesday it would double the size of its buybacks of 10- to 30-year debt to at least $4 billion per operation, aiming to steady a market unsettled by concerns about the widening U.S. fiscal deficit.
The announcement initially sparked a sharp selloff in the currency, with some traders arguing the pressure linked to a larger deficit could end up translating into a weaker dollar rather than higher yields reflecting the fiscal outlook. Reuters cited market commentary referring to this dynamic as a potential “debasement trade,” which has also supported alternatives like gold and bitcoin.
On Thursday, the market appeared to push back, with U.S. yields renewing their rise, said Sarah Ying, head of FX strategy at CIBC Capital Markets. Ying described Treasury Secretary Scott Bessent as “testing the market” while noting the move did not seem credible in the immediate term.
Reuters added that Bessent said he may increase the volume of bonds the government repurchases, while arguing that yields do not reflect underlying fundamentals. The dollar index rose 0.06% to 98.89, the euro fell 0.01% to $1.1676 after earlier touching $1.171, and the yen weakened 0.6% to 159.12 per dollar, following the timing of the buyback plan that came soon after the Treasury’s August quarterly refunding statement and ahead of a 20-year bond auction.
Latest closeGold $4,432.00 ▲1.6%|Bitcoin $72,725.05 ▲5.0%|Dollar index 99.64 ▼0.3%