Dollar Holds Gains on Warsh Nomination

The dollar index held its decline around 98.8 on Monday, remaining under pressure after posting significant losses last week, as a sharp rise in Treasury yields heightened concerns over the US government’s mounting debt burden and weighed on the dollar’s appeal. The greenback's decline came as Treasury Secretary Bessent outlined a debt-buyback strategy he described as a “Treasury twist,” under which the government would buy back longer-dated Treasury securities to help influence the yield curve and manage borrowing costs. Meanwhile, investors continued to monitor tensions in the Middle East, with the US expected to announce new sanctions against Tehran. Iran, which has already faced decades of US sanctions, said the new measures were “bound to fail.” Investors are now turning their attention to key US economic data and Federal Reserve policy signals, including the July PCE inflation report and remarks from Fed Chair Kevin Warsh at the Jackson Hole economic symposium later this week.

The dollar index traded around 98.8 on Friday and was on track to lose nearly 1% for the week, as the US government’s bond buyback plan heightened market volatility and boosted demand for safe-haven metals and other currencies at the expense of the greenback. The dollar index fell sharply on Wednesday after the US Treasury Department announced larger debt buybacks aimed at containing borrowing costs. Long-term Treasury yields initially declined on Wednesday before rebounding a day after amid concerns that the government’s plan may provide only a temporary solution. The market moves underscored concerns over rising US government debt, making the dollar less attractive to investors. Meanwhile, higher oil prices as the US prepares sweeping new economic sanctions against Iran also added to inflation concerns.

The dollar index held around 98.8 on Thursday, hovering near its lowest level in three months as the US government moved to contain long-term borrowing costs by expanding its bond buyback program. The US Treasury Department said it would at least double the size of liquidity-support buyback operations covering securities with maturities from 10 to 30 years, as the recent surge in yields heightened concerns over market liquidity and stability. The move signaled that the US Treasury was prepared to take a more active role in the bond market to limit long-term yields, potentially improving dollar liquidity across the global financial system. Meanwhile, minutes from the Federal Reserve’s July meeting confirmed that some policymakers favored raising interest rates this year to prevent stronger inflationary pressures from emerging later. Elsewhere, heightened uncertainty in the Middle East, with the US and Iran remaining at a stalemate, kept inflation risks in focus.