FX.co ★ Dollar Weakens as Treasury Yields Fall

The US dollar index slipped toward 102 on Friday, extending losses from the previous session as Treasury yields fell following a well-received 30-year bond auction. The strong demand for long-dated government debt signaled that investors remain willing to buy longer-term Treasuries despite the recent market selloff.

Traders also weighed the impact of lower oil prices after President Trump said the US was engaged in “productive discussions” with Iran and would refrain from attacking the country before the midterm elections.

In interest rate markets, futures are implying about an 82% probability that the Federal Reserve will leave rates unchanged this month, while the likelihood of a rate hike in December is estimated at around 81%. On Thursday, Fed Governor Christopher Waller indicated that further rate increases would likely be needed to return inflation to the central bank’s 2% target. However, he emphasized that policymakers retain “flexibility” over the pace of tightening and left open the option of pausing at the Fed’s upcoming October meeting.