Forex Today: US Dollar struggles after Treasury boosts long-term bond purchases
Here is what you need to know on Thursday, August 20:
The US Dollar (USD) weakened significantly on Wednesday after the Treasury announced it would double some long-term bond purchases, providing support to market liquidity. On Thursday morning, traders analyzed the consequences of this move and awaited US economic data, such as the weekly Initial Jobless Claims and Philadelphia Fed Manufacturing Survey for August.
The USD was the weakest among major currencies against the Swiss Franc. While the yield on the 30-year US Treasury bond dropped sharply, the 10-year bond yield declined by 1.4%. The USD Index fell 0.9% and dipped to its lowest level in nearly three months, below 99.00. The Federal Reserve's July meeting minutes indicated that many participants believed higher rates would be necessary if inflation did not subside, although some preferred avoiding immediate hikes.
Deutsche Bank's George Saravelos suggested that the Treasury's new buyback program could be a form of "soft financial repression," negatively impacting the Dollar. BNY strategists acknowledged multiple Dollar-negative factors, but cautioned against an aggressive short position, as history showed the USD as a reliable hedge during periods of bond and equity declines due to supply-driven inflation shocks.
Meanwhile, President Donald Trump announced an unprecedented economic operation against Iran, and Iranian Foreign Minister Abbas Araghchi responded that this would only harm Washington. Crude Oil prices remained stable, trading around $84.50 for a barrel of West Texas Intermediate (WTI). EUR/USD experienced a more than 0.8% increase on Wednesday and continued to rise during Asian trading hours, reaching a three-month high.
GBP/USD reached its highest level since early May above 1.3600 after Wednesday's surge. USD/JPY dropped nearly 1% on Wednesday before gradually recovering early Thursday, trading slightly below 158.50. Gold prices declined after reaching a three-month high above $4,520, as higher interest rates made the asset less attractive compared to other interest-bearing investments.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
