WASHINGTON, D.C. / RankWire.AI / – On Thursday, the U.S. dollar hovered close to a three-month low in New York trading as long-term Treasury yields pulled back. 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 appreciated to about 158.45 per dollar. Traders also digested new measures in the Treasury market along with details from the Federal Reserve’s latest policy gathering.
The Treasury Department revealed increased liquidity support buybacks for longer-dated U.S. government bonds. The maximum purchase limits will be raised from $2 billion to $4 billion for qualifying transactions. This change applies to nominal coupon securities spanning the 10-year to 20-year and 20-year to 30-year segments. The expanded buyback operations will commence on September 9 and run through November 4, coinciding with 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 near 5.18% on Thursday after falling during the prior trading session. Earlier in the week, it hit 5.337%, the highest level since 2007. As Treasury yields dip, the relative returns on dollar-denominated debt become less attractive. The Treasury Department also plans to issue an updated schedule outlining the larger buyback operations.
Major Currencies Rise Against the Dollar
A number of leading currencies gained strength as the dollar remained below the 99 mark on its index. The pound traded near $1.3604, close to its strongest point in three months. The Swiss franc changed hands at around 0.7999 per dollar. The euro maintained its position above $1.16 after extending gains from the previous session. Currency traders also monitored the yen after it recently approached the 160-per-dollar level watched by market participants.
Minutes from the Federal Reserve’s July 28 and 29 meeting revealed ongoing concerns about high inflation. Policymakers kept the federal funds target range steady at 3.5% to 3.75%. Nine officials favored holding rates steady, while three supported a quarter-point hike. The Federal Reserve noted that economic activity continued expanding at a solid pace and observed that inflation remained above its 2% goal.
Federal Reserve Meeting Highlights Rate Hike Discussions
The minutes indicated that several policymakers were prepared to advocate for higher interest rates in July. Many suggested that tighter policy might be necessary if inflation failed to move toward the 2% target. The central bank also maintained its approach to reserves in the banking system, continuing to roll over principal payments from Treasury securities at auction. The upcoming Federal Reserve policy meeting is scheduled for September 15 and 16.
The recent decline of the dollar coincided with a retreat in bond yields and market assessments of the U.S. policy landscape. The dollar index stayed near levels last seen in May, while the 30-year Treasury yield remained below the 19-year high reached earlier this week. Starting in September, the expanded Treasury buybacks will be in effect, 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.