The euro climbed to $1.167 on Wednesday, its strongest level in three months, mirroring broad gains across G10 currencies after the US Treasury expanded its bond buyback program, triggering a sharp decline in the dollar. The Treasury doubled the cap on long-term notes and bonds to be repurchased in the next fiscal quarter, a move expected to boost dollar liquidity via the US Treasury General Account.
The measures suggest Washington is prioritizing lower long-term yields and is prepared to increase the dollar supply, supporting currencies that make up the DXY basket. At the same time, surging natural gas prices in Europe—driven by supply disruptions linked to the Middle East—are seen sustaining upside risks to inflation. In response, the European Central Bank is widely expected to implement additional interest rate hikes this year to contain price pressures.