Dollar hugs three-month lows as Treasury seeks to sooth the bond market

The U.S. dollar experienced a significant drop on Thursday, reaching near three-month lows due to measures unveiled by the U.S. Treasury Department to stabilize the bond market. The Treasury announced plans to double liquidity support buyback operations for longer-dated bonds, which led to the 30-year Treasury yield reaching a 19-year high of 5.337%.

This move was aimed at counteracting the steep bond selloff that pushed long-end yields to their highest levels since 2007. Analysts noted that the Treasury's actions, while not formal quantitative easing or yield curve control, signaled Washington's readiness to mitigate rising term premia. Brian Jacobsen, a chief economic strategist, emphasized that although the Federal Reserve cannot impact long-term rates, the Treasury's move to issue more short-term debt reflects the current era of fiscal dominance and modern monetization.

The Japanese yen strengthened against the dollar, reaching 158.32 per dollar, while the British pound and Swiss franc also showed movement, with sterling at $1.3603 and the Swiss franc near a two-month high.