US Dollar: Under pressure as yields capped – OCBC
OCBC strategists Sim Moh Siong and Christopher Wong say the Dollar has weakened to its lowest level since May as expanded Treasury buybacks pushed long-end US yields lower.
US Dollar has slipped to its weakest level since May as Treasury buybacks drive down long-end yields, according to OCBC strategists Sim Moh Siong and Christopher Wong. The strategists anticipate further downward pressure on the USD as long-end yields remain restrained and the Federal Reserve maintains a hold on policy. The U.S. Treasury plans to expand its longer-dated bond buyback operations from $2 billion to at least $4 billion during the upcoming refunding quarter, from September 9 to November 4.
This move signifies Treasury's discomfort with rising long-term yields and aims to curb further increases in the near term. However, structural factors such as substantial AI-related financing needs, persistent fiscal deficits, and rising Japanese government bond yields continue to push yields upward. The weakened USD may be a trade-off to maintain the attractiveness of U.S. government debt for foreign investors.
The next significant event is Fed Chair Jerome Powell's speech at the Jackson Hole symposium next week, where a hawkish message is unlikely if the Fed remains on hold. In the meantime, market attention turns to U.S. economic data and Middle East headlines for further trading opportunities.
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