The US dollar rebounded from earlier losses on Thursday after the Treasury Department announced it would double the size of its buybacks of 10- to 30-year debt to at least $4 billion per operation. This move aims to steady the Treasury market, which had been unsettled by concerns over the growing US fiscal deficit, according to livemint.com.
The Treasury's decision to increase buybacks was revealed on Wednesday as part of efforts to hold down longer-term Treasury yields. Traders reacted by pushing the dollar higher after a period of selloff driven by fears over the deficit and inflation. The Federal Reserve minutes also showed several officials favored hiking interest rates, with markets pricing in a 67% chance of a hike by December, further supporting the dollar's recovery, livemint.com reported.
The dollar's earlier selloff had reflected worries about the US fiscal deficit and inflation, which had fueled a shift into gold and bitcoin as alternative assets. The Treasury's buyback plan is intended to ease strains on fiscal and Federal Reserve credibility by reducing pressure on bond markets, which in turn supports the dollar. This intervention follows a period of volatility in global forex markets and highlights the government's active role in managing debt costs, according to livemint.com.
The Treasury's announcement to double buybacks to at least $4 billion per operation was made public on August 19, with markets responding the following day by pushing the dollar higher. The Federal Reserve's upcoming decisions on interest rates remain a key factor for currency traders, with the next major policy update expected after the December meeting, livemint.com noted.