Dollar near three-month low on Treasury buyback worries

On August 21, the U.S. dollar hit a three-month low against the euro due to concerns over the U.S. Treasury's plan to expand buybacks of longer-dated government debt. Treasury Secretary Scott Bessent hinted at increasing these repurchases further, following the department's surprise pledge to double the size of its buybacks of longer-dated debt to curb bond yields.

The 30-year yield surged to its highest level in seven years, with traders worried about deteriorating fiscal outlook, heavy issuance, geopolitical risk from the Iran war, and uncertainty around the Federal Reserve's policy direction. Despite Treasury Secretary Bessent's efforts to suppress U.S. yields, they have not helped the dollar, but have instead weakened it, according to Marc Chandler, chief market strategist at Bannockburn Global Forex.

The dollar index rose slightly, while the euro also strengthened. Sterling and Bitcoin also saw gains. The next test for Treasury yields will be next Friday, when Federal Reserve Chairman Kevin Warsh presents a speech at the central bank's Jackson Hole symposium.