WASHINGTON, D.C. / RankWire.AI / – On Thursday, the US dollar hovered close to a three-month minimum, driven by a decline in long-term Treasury yields. The dollar index hovered around 98.81 against a basket of six major currencies. The euro increased to approximately $1.1676, reaching its highest point since late May. Meanwhile, the yen appreciated to around 158.45 per dollar. Investors continued to process new Treasury market measures alongside details from the Federal Reserve’s latest policy meeting.
The Treasury Department revealed larger liquidity-support buybacks for longer-dated US government securities, with maximum purchase sizes increasing from $2 billion to $4 billion for eligible operations. This change pertains to nominal coupon securities in the 10-year to 20-year and 20-year to 30-year segments. The expanded operations are scheduled to commence on September 9 and run through November 4, marking the conclusion of the current quarterly refunding period.
The announcement coincided with a notable decline in long-term government bond yields, with the 30-year Treasury yield near 5.18% on Thursday after dropping during the previous session. Earlier this week, the yield hit 5.337%, its highest since 2007. Lower Treasury yields tend to diminish the relative return on dollar-denominated debt. The Treasury Department is expected to release an updated tentative schedule for the larger buyback operations.
Major currencies strengthen against the dollar
Several leading currencies gained strength as the dollar index remained below 99. The British pound traded around $1.3604, close to its three-month peak. The Swiss franc was at about 0.7999 per dollar. The euro held above $1.16 after gains carried over from the previous session. Currency markets also closely monitored the yen, which recently approached the 160-per-dollar mark watched by traders.
Minutes from the Federal Reserve’s July 28 and 29 meeting revealed ongoing concerns about persistent inflation. The policymakers kept the federal funds target range steady at 3.5% to 3.75%. Nine officials supported maintaining current rates, while three preferred a quarter-point increase. The Federal Reserve noted that economic activity continued expanding at a robust pace and acknowledged that inflation remained above its 2% goal.
Fed meeting minutes underscore rate hike considerations
The record from the meeting indicated that several policymakers were inclined to support higher interest rates in July. Many members suggested that tighter policy might be necessary if inflation failed to trend toward the 2% target. The central bank also maintained its stance on reserves in the banking system by continuing to roll over principal payments from Treasury securities at auction. The next scheduled Federal Reserve policy meeting will take place on September 15 and 16.
The recent drop in the dollar was driven by falling bond yields and market evaluations of the new US policy landscape. The dollar index remains close to levels observed in May, while the 30-year Treasury yield remains below the 19-year high seen earlier this week. The upcoming Treasury buyback programs in September and the unchanged interest-rate range continue to influence trading in foreign exchange and US government bond markets on Thursday.