Dollar wobbles as Treasury's bond-market buybacks raise fresh concerns

The dollar experienced a decline on Friday, with investors expressing doubts about whether the U.S. Treasury's bond-market buybacks would ultimately weaken the currency's confidence. As a result, the euro rose by 0.13% to $1.1694 and was on track for its fourth weekly gain. The British pound also increased by 0.15% to $1.3652, remaining close to its May high.

U.S. Treasury Secretary Scott Bessent hinted at the possibility of expanding the government's repurchases of Treasuries further, following a surprise pledge to double the size of buybacks of longer-dated debt to curb bond yields. However, some argued that these measures might merely shift pressure to other areas of U.S. markets, with the currency potentially facing the brunt.

Capital Economics' chief markets economist, Jonas Goltermann, expressed reduced confidence in the dollar's rebound, citing ongoing uncertainties such as the Iran war and interest rate trends. The developments could complicate the outlook for currency markets, particularly ahead of the Federal Reserve's Jackson Hole symposium, where Chair Kevin Warsh's speech will be closely examined.

The dollar index, tracking the U.S. currency against six peers, was down about 0.94% weekly and near a three-month low. Meanwhile, the Japanese yen appreciated 0.14% against the dollar, reaching 158.81, after core consumer inflation data showed a July acceleration, supporting the case for a Bank of Japan rate hike.