United States Dollar Index falls as US Treasury doubles long-dated debt buybacks

The US Dollar Index dropped on Wednesday as the US Treasury doubled its buybacks of long-dated government securities. The DXY, which measures the value of the Greenback relative to six major currencies, was trading around 98.86, its lowest level since late May, and had decreased by 0.80% by the time of reporting. The Treasury announced that it would at least double the size of its liquidity-support buybacks for longer-dated government securities, increasing purchases in the 10-to-20-year and 20-to-30-year maturity sectors from $2 billion to at least $4 billion per operation.

This move caused long-dated Treasury bonds to rise, pushing yields sharply lower. The 10-year yield fell by more than 5 basis points to 4.64%, while the 30-year yield dropped nearly 9 basis points to 5.19%. The 30-year yield had previously risen above 5.30% on Tuesday, its highest level since 2007. Falling Treasury yields reduced the relative appeal of US assets, contributing to the pressure on the Greenback, which had already been weakened by expectations of a delayed Federal Reserve interest-rate hike following weak US economic data in recent weeks.

However, uncertainty surrounding the Fed's policy outlook persisted due to the energy shock from the Middle East conflict, which clouded inflation expectations and prevented traders from ruling out a rate hike later in the year.