The U.S. dollar slipped to a three-month low against a basket of currencies on Friday, as investors questioned the Treasury’s latest efforts to manage soaring debt levels through expanded buybacks of longer-dated securities.
The ICE Dollar Index, which tracks the greenback against six major peers, stood at 98.82, reflecting a decline of more than 0.8% for the week. The euro strengthened 0.1% to $1.1685, nearing a three-month high, while sterling edged 0.08% higher to $1.3643, flirting with a six-month peak. The Australian dollar rose 0.13% to $0.7123, and the New Zealand dollar advanced 0.23% to $0.5957. The Japanese yen, meanwhile, slipped 0.05% to 159.12 per dollar.
The Treasury’s plan to double buybacks on longer-dated securities has drawn scrutiny, with critics arguing it signals deeper fiscal strains rather than a technical solution. U.S. debt surpassed $40 trillion this year, intensifying concerns over borrowing costs and deficit management. The U.S. 30-year Treasury yield rose 1.4 basis points to 5.2508%, while the 10-year benchmark steadied at 4.7041% after a 4.5-basis-point increase overnight.
Analysts highlighted the potential for the buyback program to undermine confidence in dollar-denominated assets. Carol Kong, currency strategist at Commonwealth Bank of Australia, noted that the initiative could encourage greater hedging and diversification away from U.S. dollar holdings. "The Treasury's long bond buybacks are another example of unconventional tools being used to manage borrowing costs amid high debt and fiscal uncertainty," she said. "This could weigh on investor sentiment toward dollar assets."
Goldman Sachs strategist Vitali Meschoulam echoed skepticism, stating that while policymakers have tools to influence long-term yields, the current challenge is fundamentally fiscal. "Historically, yield suppression can work temporarily, but when markets focus on sovereign financing dynamics, it becomes less effective," he said. Meschoulam cited past examples from developed and emerging markets to illustrate the limitations of such interventions.
The dollar’s decline extended beyond traditional currencies, with Bitcoin trading 1.6% higher at $73,823.43, marking its largest weekly gain in 2.5 years at 17%. Spot gold also surged more than 3% for the week, reflecting broader risk sentiment amid fiscal and policy uncertainties.
