The dollar sold off broadly on Wednesday after the US Treasury said it will at least double its long-dated debt buyback operations, pulling 30-year yields back below 5.20% and pushing the euro toward the stronger end of major currencies. Attention now turns to the July FOMC minutes for signs of how far hawkish sympathy on the Fed extends.
Treasury Buybacks Strip Away the Dollar's Yield Support
The dollar came under broad selling pressure in early US trading Wednesday after long-dated Treasury yields reversed sharply from this week's multi-year highs. The 30-year yield fell back below 5.20% after reaching above 5.33% earlier in the week, near its highest level in two decades, and that move stripped away a source of recent support for the greenback.
That trigger came from the Treasury Department, which said it will at least double the maximum size of its long-dated debt buyback operations from $2 billion to at least $4 billion, starting September 9 and running through November 4. The operations will target the 10-20 year and 20-30 year sectors, where selling pressure has been most intense since late June.
Euro Firms as the Dollar Slips
Currency rankings on Wednesday showed no unified risk or commodity theme, but they did show a clear dollar story. The dollar was the weakest major currency, followed by the Aussie and Loonie, while the Swiss Franc led, followed by the Yen and the Euro. The Kiwi and Sterling sat closer to the middle of the pack.
That ranking makes the dollar-yield relationship the clearest driver of the day's moves, rather than any broader commodity or risk-sentiment theme.
Fed Minutes Carry the Next Test
Attention now shifts to the July FOMC minutes, though the headline vote already showed a divided Committee. The Fed held rates by a 9-3 vote, with Hammack, Kashkari and Logan dissenting in favor of a hike — the first unified three-way hawkish dissent of its kind since 2016. The real question is whether those three were genuinely isolated or merely the only officials willing to register formal dissent.
If the minutes show several hold voters were privately sympathetic to tightening but preferred to wait for more data, the 9-3 vote would understate the Committee's underlying hawkishness — a signal that could matter for the dollar's recovery prospects. But the minutes only reflect the Committee's thinking as of July 30, and markets have since received weaker employment data, softer CPI, subdued retail sales and flat PPI, reducing expectations for September tightening. That gap gives added weight to Fed Chair Warsh's August 28 Jackson Hole keynote, which will incorporate information the July minutes could not.
Source: ActionForex
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