WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar remained close to a three-month low on Thursday, driven by a slowdown in long-term Treasury yields. The dollar index hovered around 98.81 against a basket of six major currencies. The euro rose to approximately $1.1676, reaching its highest point since late May. Meanwhile, the yen strengthened to around 158.45 per dollar. Market participants also digested new measures from the Federal Reserve’s recent policy meeting, along with additional details from the Treasury market.
The Treasury Department announced increased liquidity support through larger buybacks of longer-dated U.S. government securities. The maximum purchase size will be raised from $2 billion to $4 billion for eligible operations. This change applies specifically to nominal coupon securities in the 10-year to 20-year and 20-year to 30-year segments. These expanded operations are scheduled to commence on September 9 and will run through November 4, marking the conclusion of the current quarterly refunding period.
This announcement coincided with a notable decline in long-term government bond yields. The 30-year Treasury yield stood at roughly 5.18% on Thursday after dipping during the previous trading session. Earlier in the week, it hit 5.337%, the highest level since 2007. A decrease in Treasury yields can diminish the relative return on dollar-denominated debt. The Treasury Department also plans to issue an updated tentative schedule for the larger buyback operations.
Major currencies strengthen against the dollar
As the dollar index stayed below the 99 mark, several leading currencies gained ground. The British pound traded near $1.3604, close to its strongest level in three months. The Swiss franc exchanged hands at approximately 0.7999 per dollar. The euro managed to stay above $1.16 after extending its gains from the previous session. Currency traders also monitored the yen, which recently approached the 160-per-dollar threshold observed by market participants.
Minutes from the Federal Reserve’s July 28 and 29 meeting indicated ongoing concerns about persistent inflation. The policymakers maintained the federal funds target range at 3.5% to 3.75%. Nine officials supported keeping rates steady, while three favored a quarter-point increase. The Federal Reserve stated that economic activity was still expanding at a solid pace and acknowledged that inflation remained above its 2% goal.
Federal Reserve meeting records reveal rate hike considerations
The minutes from the meeting showed that several policymakers were inclined to endorse higher interest rates in July. Many officials suggested that tighter monetary policy might be necessary if inflation failed to trend toward the 2% target. The central bank also maintained its approach to banking system reserves by continuing to roll over principal payments from Treasury securities at auction. The next scheduled Federal Reserve policy meeting is set for September 15 and 16.
The recent decline of the dollar coincided with retreating bond yields and markets analyzing the updated U.S. policy landscape. The dollar index remained near levels last seen in May, and the 30-year Treasury yield stayed below the 19-year high reached earlier this week. The expanded Treasury buyback program will commence in September, with the benchmark interest-rate range remaining unchanged. These developments continued to influence trading in foreign exchange and U.S. government bond markets on Thursday.