Dollar Weakens Ahead of US Treasury Buyback Announcement
The U.S. dollar weakened ahead of an announcement by the U.S. Treasury regarding a buyback operation for long-term Treasuries, which is seen as bearish for the currency. The dollar index fell to a 2.5-week low and was down -0.15%. Meanwhile, strength in the Japanese yen weighed on the greenback after comments from U.S. Treasury Secretary Bessent suggested potential intervention with Japan to support the yen. The euro gained against the dollar amid broader weakness in the U.S. currency and expectations of a rate hike by the European Central Bank at its upcoming meeting. However, rising crude oil prices limited gains for both the euro and yen due to their negative impact on energy-dependent economies like Europe and Japan. The 10-year Treasury note yield rose to a multiyear high, supporting dollar interest differentials. Markets are pricing in a 64% chance of a Federal Reserve rate hike at its next meeting while also expecting the ECB and BOJ to raise rates by 25 basis points each this month. Japan’s yen received additional support from speculation that the Government Pension Investment Fund may adjust its asset allocation, potentially increasing holdings of Japanese government bonds.
Topics: dollar fed policy expectations oil prices treasury operations yen