US dollar dips to three-month low as Treasury buyback strategy weighs on currency

The US dollar hovered near a three-month low compared to the euro on Friday, according to Devdiscourse, as traders reacted to the U.S. Treasury's evolving debt management strategy. The currency slide occurred alongside broader market turbulence that saw U.S. Stock indices close sharply lower following disappointing retail earnings and rising commodity prices. Additional pressures stemmed from geopolitical concerns related to the Iran conflict, alongside a broader market focus on the Federal Reserve’s policy trajectory.

Treasury Secretary Scott Bessent announced a potential increase in repurchases of long-term government debt, aiming to support liquidity and calm disruptions in the bond market. The Treasury unveiled plans to double the maximum size of long-term bond buyback operations from $2 billion to at least $4 billion per operation, covering nominal securities between 10 and 20 years and between 20 and 30 years. The expansion is scheduled to take effect on September 9, 2026, and run through November 4, 2026, coinciding with the Treasury's quarterly refunding announcement. According to Devdiscourse, the move initially surprised markets following the department’s prior pledge to double buybacks.

Media additions

The intervention followed a sharp selloff that previously pushed the 30-year Treasury yield to a high of 5.337%. Speaking on CNBC, Bessent defended the department's approach, stating that the government possesses a big toolkit to lower yields and pushing back against deficit worries by attributing the fiscal gap largely to temporary tariff refunds and business investment incentives. Morningstar noted that Bessent's comments sought to calm investors after a bond selloff.

Despite these assurances, financial markets displayed considerable skepticism. Analysts at Commerzbank Research described the market reaction as a fading of the "Bessent put," noting that bond repurchases offered only a temporary fix that failed to anchor long-term yields. Strategists at OCBC Group Research added that the buyback plan failed to address persistent fiscal and structural pressures.

Michael Wan, senior currency analyst at MUFG Bank, stated, markets do not seem to be buying into the ability of the U.S. to credibly consolidate its fiscal deficit so far. Analysts at several firms argued that altering the timing of debt sales does not resolve the root causes of higher yields, namely structural fiscal and inflation risks. Some observers warned that the strategy could backfire by signaling desperation, prompting investors to demand higher returns to compensate for perceived fiscal deterioration.

The currency weakness rippled across broader asset classes. The US Dollar Index fell around 0.25% on Friday, according to Economies, approaching its lowest level in three months. Concurrently, gold prices surged around 1.5% to $4,585.02 an ounce in European trading, hitting their highest level since May 29. Gold holdings at the SPDR Gold Trust increased by around 4.27 metric tons to 1,038.93 metric tons.

Equities faced downward pressure as well. The three major U.S. Stock indices closed sharply lower after Walmart reported disappointing results that dragged down the retail sector, while Brent crude oil traded around $93.50, underlining persistent near-term inflation pressures. Additional pressures stemmed from heavy capital spending by technology companies building out artificial intelligence infrastructure, which competes directly with government debt issuance for investor capital.

What to watch next

• September 9, 2026: The Treasury’s expanded long-term bond buyback operations take effect, doubling the maximum size per operation to at least $4 billion.
• Federal Reserve meetings and commentary: Markets are closely monitoring upcoming U.S. Economic data and central bank remarks ahead of policy decisions, where CME FedWatch data indicates market pricing for potential interest rate adjustments.
• November 4, 2026: The scheduled conclusion of the current Treasury buyback expansion window, coinciding with the quarterly refunding announcement.