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Dollar stabilizes as Treasury yields level off amid Fed policy doubts
The analysis says that while stabilizing Treasury yields typically support the greenback, inconsistent fiscal and central bank actions could still weigh on US dollar confidence.
The US dollar is trying to find support as Treasury bond yields stabilize, according to analysis from Action Forex. The piece argues that growing doubts about the Fed are weighing on the currency, even as yields stop moving higher.
Action Forex points to Scott Bessent’s view that budget deficit fears are exaggerated, saying tariff revenue is expected to offset the deficit more than the market assumes. It also notes that import duty revenue for 2026 is expected to be roughly the same as 2025, while warning that debt risk could broaden into a currency risk.
The article cites past cases where government attempts to manage bond markets backfired, including yen weakness after Japanese efforts to control bond yields and the pound falling after UK debt turmoil in 2022. It compares the US Treasury’s current approach to long-term bond purchases that resemble quantitative easing, contrasting that with calls to reduce the Fed balance sheet.
Finally, the analysis says the usual mix of tailwinds for a safe-haven dollar, such as falling stock indices, steadier Treasury yields, and rising oil prices tied to the Middle East conflict, is not producing the expected dollar strength. It concludes that nothing “terrible” has yet happened, but suggests the Treasury’s actions are undermining confidence in both the Fed and the US currency.