US Dollar: Consolidation around 99.00 after buyback news – DBS

DBS Group Research economist Chang Wei Liang reports that the US Dollar has strengthened slightly, with the DXY index consolidating near 99.00 after the US Treasury announced an expansion of long-end bond buybacks. Liang asserts that while buyback tweaks have a minimal market impact, they cannot bring about significant fiscal changes. He cautions that tighter US sanctions on Iran could exacerbate inflation expectations, leading to higher US yields and the Dollar's value.

The USD has shown a modest recovery in long-end US Treasury yields, which aligns with DBS's expectations. The DXY index maintains its position around 99.00 following the Treasury's announcement. Liang emphasizes that changes in buybacks alone are unlikely to have a substantial impact on markets as the US budget is determined by Congress, not the Treasury. Therefore, such changes can only yield transient effects.

Iranian sanctions, which are expected to tighten by the following Monday, could have unexpected consequences, including the potential rise in inflation expectations. This could result in increased US yields and the strengthening of the Dollar. The FXStreet Insights Team, comprising skilled journalists, has compiled this market observation based on insights from renowned experts. The content includes notes from commercial analysts, as well as additional perspectives from both internal and external analysts.