US dollar set to decline for second consecutive month as government accelerates debt buybacks

The US dollar is on track to close August with a 0.9% loss on the Bloomberg Dollar Spot Index, following a 1.3% slide in July. On August 19, the Treasury announced it would accelerate its liquidity-support buyback program targeting longer-dated government securities. The maximum size of certain buyback operations will jump to $4 billion per event, double the previous $2 billion cap. The expanded program runs from September 9 through November 4. What the Treasury is actually doing The 30-year Treasury yield hit 5.30% in mid-August, its highest level since 2007. That kind of number makes the cost of servicing existing debt significantly more painful, and it makes issuing new debt even more expensive. Treasury Secretary Scott Bessent added fuel to the fire on August 20 when he suggested buybacks could exceed even the announced figures. The dollar dropped 0.8% on August 19 alone, falling to its lowest level since late May. The debasement conversation Strategists at MUFG, Scotiabank, and Citigroup have all flagged further downside risk for the dollar in the wake of these developments. The common thread in their analysis is dollar debasement: a sustained pattern where fiscal policy choic...