United States Dollar Index softens below 99.00 on US fiscal concerns

The US Dollar Index (DXY) slipped below 99.00 on Monday due to concerns over U.S. fiscal policy. The index fell to a three-month low as market uncertainty grew over the Treasury's plan to increase its bond buybacks. Treasury Secretary Scott Bessent announced that the agency would double its long-end bond purchases to $4 billion per operation in an attempt to curb rising 30-year yields.

However, Bessent's efforts have not been as effective in lowering yields, which has negatively impacted the dollar. Marc Chandler, a chief market strategist at Bannockburn Global Forex, stated that the market is pushing back against these moves. Recent inflation data have shown signs of easing, but some Federal Reserve officials have indicated they would need further evidence to confirm that price pressures are subsiding.

Currently, there is a 41% chance of a Federal Reserve rate hike at the upcoming meeting, down from 47% a month ago, according to the CME FedWatch Tool. Later on Monday, Bessent is set to hold a press conference, following the US President's announcement of unprecedented economic sanctions against Iran. The current policy mix leaves the USD particularly exposed to fiscal concerns, according to Scotiabank strategists. The Dollar remains under pressure due to fiscal uncertainty persisting.