FX.co ★ Dollar Languishes at 3-Month Low

The dollar index hovered around 98.8 on Thursday, trading near a three-month low as the US government moved to curb long-term borrowing costs by expanding its bond buyback program. The US Treasury Department announced it would at least double the size of liquidity-support buyback operations for securities maturing in 10 to 30 years, after the recent spike in yields raised concerns about market liquidity and stability. This step signaled that the Treasury is prepared to take a more active role in the bond market to contain long-term yields, a move that could enhance dollar liquidity across the global financial system. Meanwhile, minutes from the Federal Reserve’s July meeting showed that some policymakers favored additional interest rate hikes this year to prevent stronger inflationary pressures from building later on. Elsewhere, elevated uncertainty in the Middle East, with the US and Iran still locked in a stalemate, kept inflation risks firmly in focus.