WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar remained close to a three-month low on Thursday amid a decline in long-term Treasury yields. The dollar index hovered around 98.81 against a basket of six major currencies. The euro appreciated to approximately $1.1676, reaching its highest point since late May. Meanwhile, the yen strengthened to about 158.45 per dollar. Investors processed new measures in the Treasury market along with details from the Federal Reserve’s latest policy meeting.
The Treasury Department announced an increase in liquidity-support buybacks for longer-term U.S. government bonds. The maximum purchase size will increase from $2 billion to $4 billion for qualifying operations. This adjustment affects nominal coupon securities in the 10-year to 20-year and 20-year to 30-year segments. These expanded buyback operations will commence on September 9 and continue 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. The 30-year Treasury yield was around 5.18% on Thursday after decreasing in the previous session. Earlier this week, it hit 5.337%, the highest since 2007. Falling Treasury yields can diminish the relative returns on dollar-denominated debt. The Treasury Department intends to publish an updated tentative schedule for the expanded buyback operations soon.
Major currencies strengthen against the dollar
Several key currencies gained strength as the dollar index stayed below 99. The British pound traded near $1.3604, close to its strongest point in three months. The Swiss franc traded around 0.7999 per dollar. The euro maintained above $1.16 after extending gains from the previous session. Currency traders also monitored the yen, which recently approached the 160-per-dollar mark that market participants pay close attention to.
Minutes from the Federal Reserve’s July 28 and 29 meetings revealed ongoing concerns about persistent inflation. Policymakers kept the federal funds target range at 3.5% to 3.75%. Nine officials supported keeping rates steady, while three preferred a quarter-point hike. The Federal Reserve noted that economic activity continued to grow at a solid pace. They also recognized that inflation remained above their 2% goal.
Federal Reserve meeting reveals rate hike considerations
The minutes from the meeting indicated that some policymakers were inclined to support higher interest rates in July. Many noted that tighter policy might become necessary if inflation did not move toward the 2% target. The central bank also sustained its approach to managing reserves in the banking system, continuing to roll over principal payments from Treasury securities at auctions. The Federal Reserve’s upcoming policy meeting is scheduled for September 15 and 16.
The recent decline in the dollar stemmed from falling bond yields and market interpretations of the updated U.S. policy outlook. The dollar index stayed near levels last seen in May, while the 30-year Treasury yield remained below the 19-year high recorded earlier this week. The expanded Treasury buyback program will launch in September, with the interest-rate range remaining unchanged. These confirmed developments continue to influence trading across forex and U.S. government bond markets on Thursday.