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US Dollar Index holds near 99.00 as long-end buyback debate persists

Analysts expect DXY to stay tightly bounded around 99.0 in the near term, but warn sanctions-driven inflation risks could later lift yields and support the greenback.

Reported · Written up by our desk · Major Pairs

The US Dollar Index, DXY, is broadly consolidating near the 99.00 area as investors weigh the effects of the US Treasury's expanded long-end bond buyback alongside a modest rebound in Treasury yields, according to FXStreet.

FXStreet reports strategists are split on whether the buyback marks a durable shift toward a softer dollar or is more of a temporary measure. ING argues the move is aimed at safeguarding long-term borrowing costs, which could support a pro-risk environment, while DBS Group Research takes a more cautious view that DXY has firmed as long-end yields ticked up.

The article also notes that while buybacks can influence the long end of the yield curve, Congress controls the overall fiscal path, limiting how much administrative actions can change the deficit outlook. FXStreet adds that external risks, including possible US sanctions on Iran, could push energy prices higher, reignite inflation expectations, and thereby boost yields and demand for the greenback.

In the immediate term, FXStreet says banks project DXY will remain tightly bounded around 99.00, with ING seeing official concern about long-end yields keeping the dollar capped below that level. DBS, however, warns that without structural fiscal reform, inflation or geopolitical shocks could quickly restore upward pressure on yields and lift the greenback.

Latest closeDollar index 99.64 ▼0.3%

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