WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar held near a three-month low on Thursday as long-term Treasury yields extended their retreat. The dollar index traded around 98.81 against six major currencies. The euro strengthened to about $1.1676, reaching its highest level since late May. The Japanese yen also gained, trading near 158.45 per dollar. Markets continued to digest new U.S. Treasury measures and the latest Federal Reserve meeting record.
The U.S. Treasury Department said it would increase the size of liquidity-support buybacks for longer-dated government securities. Maximum purchases will rise from $2 billion to $4 billion for qualifying operations. The program covers nominal coupon securities with maturities between 10 and 20 years and between 20 and 30 years. The larger transactions will begin on September 9 and continue through November 4. That date marks the end of the current quarterly refunding period.
Long-term Treasury yields declined after the announcement. The 30-year yield traded near 5.18% on Thursday after falling sharply in the previous session. It had climbed to 5.337% earlier this week, the highest level since 2007. Treasury yields play an important role in global currency and bond markets because they affect returns on dollar-denominated assets. The U.S. Treasury Department also plans to issue an updated tentative schedule for the expanded buyback operations.
Major currencies advance as dollar softens
The dollar’s decline lifted several major currencies during Asian trading. Sterling traded around $1.3604 and stayed close to a three-month high. The Swiss franc strengthened to about 0.7999 per dollar. The euro remained above $1.16 after building on gains from the previous trading session. The yen also moved further from the 160-per-dollar level that it had recently approached. The dollar index, meanwhile, remained below 99 and close to its weakest point since May.
The Federal Reserve’s July 28 and 29 meeting minutes showed that policymakers remained focused on elevated inflation. Officials kept the federal funds target range at 3.5% to 3.75%. Nine policymakers supported keeping rates unchanged, while three favored a quarter-point increase. The Federal Reserve also said economic activity continued to expand at a solid pace. Inflation remained above the central bank’s 2% objective, keeping price pressures at the center of the policy discussion.
Fed minutes show divisions over rates
Several policymakers indicated at the July meeting that they were prepared to support an interest-rate increase. Many participants said higher rates could become necessary if inflation did not move toward the 2% target. The central bank maintained its existing approach to reserves in the financial system. It also continued rolling over principal payments from Treasury securities at auction. The Federal Reserve is scheduled to hold its next policy meeting on September 15 and 16.
The latest currency moves reflected lower long-term yields and newly released U.S. policy information. The dollar index remained near levels last recorded about three months ago. The 30-year Treasury yield stayed below the 19-year high reached earlier in the week. Expanded government bond buybacks will start in September, while the federal funds target range remains unchanged. Those developments continued to shape trading across foreign exchange markets and U.S. government debt on Thursday.