Dollar holds near 3-month low as Treasury expands buybacks

The dollar index held around 98.8 on Thursday, hovering near its lowest level in three months as the US government moved to contain long-term borrowing costs by expanding its bond buyback program.

The US Treasury Department said it would at least double the size of liquidity-support buyback operations covering securities with maturities from 10 to 30 years, as the recent surge in yields heightened concerns over market liquidity and stability.

The move signaled that the US Treasury was prepared to take a more active role in the bond market to limit long-term yields, potentially improving dollar liquidity across the global financial system.

Meanwhile, minutes from the Federal Reserve’s July meeting confirmed that some policymakers favored raising interest rates this year to prevent stronger inflationary pressures from emerging later.

Elsewhere, heightened uncertainty in the Middle East, with the US and Iran remaining at a stalemate, kept inflation risks in focus.