The dollar closed the week mostly lower against major currencies even as Treasury yields rose across the curve. The euro barely moved, while commodity currencies posted the sharpest gains against the greenback after a mid-week surprise from the U.S. Treasury on bond buybacks.
Euro little changed as commodity currencies lead
The U.S. dollar ended the week mostly lower against the major currencies, with the Swiss franc the only currency against which it gained on the day. The euro was little changed, rising 0.01% against the dollar, and the British pound rose a similarly modest 0.03%.
Commodity currencies posted the biggest gains against the dollar. The Australian dollar rose 0.82%, while the New Zealand dollar gained 0.52% and the Canadian dollar strengthened as the greenback fell 0.18% against the loonie. The Japanese yen added 0.08%.
Treasury's buyback surprise weighed on the dollar
Much of the week's dollar weakness traces back to Treasury Secretary Scott Bessent, who surprised markets by doubling the size of Treasury's long-term bond buybacks, raising the maximum purchase from $2 billion to at least $4 billion per operation. Bessent indicated the amount could be increased further if needed, with larger purchases targeting 10-year and longer-dated securities set to begin in September.
The move is not Fed quantitative easing — Treasury is managing existing debt rather than creating money to buy securities. Still, the prospect of larger purchases helped push long-term yields lower at least temporarily and added to selling pressure on the dollar, even though yields moved back up by Friday and finished the week higher across the curve: the 10-year settled at 4.736%, up 3.8 basis points on the day.
Strong services data underpin the economy
Away from the bond market, the S&P Global flash PMI for August pointed to stronger overall U.S. economic activity. Manufacturing slipped to 53.2 against a 53.9 forecast but stayed above the 50 expansion line, while services jumped to 56.8 versus 54.0 expected, lifting the composite reading to 56.0 from 54.5. S&P Global called it the strongest reading in more than four years, with the survey pointing to annualized third-quarter growth approaching 3%, up from 1.5% in the second quarter.
Source: investingLive
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