Dollar Nears 3-Month Low; Fed Remains Last Hope
The US dollar remained under pressure during Thursday's trading after a move by the US Treasury Department helped ease the sell-off in the bond market. The Dollar Index (DXY) fell to around 98.72—its lowest level since May 14—while the euro strengthened to approximately US$1.1692, a high not seen since mid-May.
Pressure on the greenback stemmed primarily from a decline in long-term Treasury yields. The yield on the 30-year US bond had previously touched 5.337%—a 19-year high—before retreating to around 5.198% following a Treasury policy shift that increased long-term debt buybacks and moved some financing needs toward short-term debt.
Global bond markets had previously faced pressure due to concerns over ballooning government debt and high oil prices, amidst a lack of significant developments regarding the US-Israel conflict with Iran. This combination prompted investors to demand higher premiums for holding long-term bonds.
The dollar's weakness also gave the Japanese yen room to recover away from the psychological 160 level. The USD/JPY pair traded around 158.41, following coordinated US-Japan intervention in late July that helped the yen rebound from a low of around 164 per dollar. The British pound also strengthened to US$1.3631, a three-month high.
However, the dollar's trajectory is not yet fully bearish, as minutes from the July FOMC meeting revealed that inflation concerns remain strong within the Federal Reserve. Several officials are prepared to support interest rate hikes, while many members believe further tightening may be necessary if inflation fails to move toward the 2% target.
Newsmaker Analysis: The dollar remains under pressure due to falling Treasury yields and improving risk sentiment. As long as the DXY holds below the 99.00 level, pressure on the greenback is likely to persist, providing support for the euro, the pound, and the yen. However, the Fed's continued hawkish stance and inflation risks stemming from energy prices could limit the dollar's decline should yields rise again. (arl)
Source: Newsmaker.id
