The U.S. dollar rebounded on Thursday after approaching its weakest level in three months, as a sharp bond market selloff eased following Treasury intervention and a retreat in global yields.
The Dollar Spot Index, which tracks the greenback against major peers, slipped 0.13% to 98.80 after falling 0.8% in the prior session. The index had approached its lowest point since mid-May, weighed down by broad-based losses amid rising geopolitical tensions in the Persian Gulf and surging oil prices that pushed long-term bond yields to multi-decade highs earlier in the week.
On Tuesday, the U.S. 30-year Treasury yield touched a 19-year peak of 5.337% before easing back toward 5.18% after the Treasury doubled the cap on its long-end buyback operations from $2 billion to at least $4 billion. The move was described by analysts as a stabilizing measure that provided temporary relief to the beleaguered bond market.
ING economists noted the Treasury’s intervention had been "warmly greeted by investors," though they cautioned that a more structural solution—such as fiscal consolidation—would be required for a sustainable recovery in bond markets. The Treasury’s increased vigilance on the long end of the curve was seen as a welcome step amid persistent concerns over persistent price pressures.
The dollar’s recovery came as the Japanese yen held near 158.43 per dollar, up 0.1% following a 1% rally the previous day. The South Korean won steadied around 1,320 per dollar after an overnight surge of 1.8%, while the Indian rupee edged higher, ending a five-session losing streak.
The euro advanced 0.2% to its highest level since mid-May, and the British pound gained 0.3% to its strongest since early May. Traders also priced in expectations of further monetary tightening by the European Central Bank and Bank of Japan, with the ECB seen as a potential candidate for rate hikes next month.
Oil prices remained elevated, with Brent crude holding near $92 a barrel, while geopolitical risks in the Middle East continued to underpin safe-haven demand. The Federal Reserve’s July meeting minutes, released earlier this week, highlighted deep concerns among policymakers about persistent inflation, reinforcing expectations that the central bank would maintain a hawkish stance.
Attention now turns to remarks from Fed Chair Kevin Warsh at the upcoming Jackson Hole Symposium, where further signals on monetary policy direction are anticipated.
