The U.S. dollar extended its weekly decline on Friday, touching its lowest level in three months as Treasury bond interventions and rising long-term yields weighed on sentiment. The U.S. Dollar Index fell 0.1% to 98.80 by 15:33 ET, capping a 0.9% weekly loss—the steepest since late July.
Treasury’s announcement that it would increase repurchases of long-dated government debt to at least $4 billion from $2 billion provided only a brief respite for the bond market. The 30-year yield, which had hit a 19-year high of 5.337% on Tuesday, eased to 5.276% but remained elevated, while the 10-year yield climbed to a fresh 52-week high of 4.748% before settling at 4.738%. Analysts noted the move signaled discomfort with the surge in borrowing costs but did not address underlying fiscal pressures.
Robin Brooks, Senior Fellow at the Brookings Institution, said the Treasury’s action underscored a lack of willingness to curb deficits, warning that financial engineering alone would not resolve structural strains. "When fiscal policy is out of control, governments can cap yields, but this merely shifts depreciation pressure onto the currency," Brooks said.
The yen steadied after sharp losses earlier in the week, with USD/JPY down 0.2% for the week. Japan’s core consumer inflation accelerated to 1.8% in July, reinforcing expectations for a Bank of Japan rate hike in September. The move followed Tokyo’s prior intervention to support the currency, which had slumped to multi-decade lows.
Regional currencies showed divergent trends. The euro rose to $1.1679, near its highest since mid-May, while sterling climbed to $1.3646, its strongest since mid-February. The South Korean won surged 2.1% for the week, supported by tech-export strength, while the Indian rupee gained 0.3% despite energy import pressures. The won’s advance pushed USD/KRW to its lowest since September 2025.
Commodities added to the week’s volatility. Brent crude futures traded above $94 a barrel, up about 6% on the week, as oil prices fueled inflation concerns. Gold futures held near $4,661.60, reflecting safe-haven demand amid market uncertainty.
The dollar’s retreat extended beyond the U.S. Dollar Index, with the euro and sterling outperforming on the week. Analysts cited a mix of technical positioning, divergent central bank outlooks, and Treasury’s intervention as key drivers. With the Jackson Hole Economic Policy Symposium approaching next week, markets brace for further signals on monetary policy and fiscal sustainability.
