Dollar wobbles as investors balk at US Treasury’s rescue efforts

Published Fri, Aug 21, 2026 · 10:05 AM

[SINGAPORE] The dollar was on shaky ground and set for a weekly loss on Friday, as investors viewed the US Treasury’s bond buyback gambit as merely a temporary fix, while raising fresh concerns about officials’ increasingly interventionist approach.

US Treasury Secretary Scott Bessent said overnight he may further increase the government’s repurchases of Treasuries, a day after the department announced it would double the size of buybacks on longer-dated securities over the next quarter in an attempt to stem a sharp rise in yields.

Bessent also said he and White House budget director Russell Vought will be embarking on a new fiscal consolidation effort directed by US President Donald Trump.

The moves, however, did little to stem the selloff in US Treasuries and weighed on the dollar, as investors grew wary of the deteriorating fiscal picture and worries about the credibility of US institutions resurfaced.

Against a weaker dollar, the euro was perched near a three-month high and last bought US$1.1685, on track for a weekly rise of 1 per cent.

Sterling flirted with a six-month peak and edged 0.08 per cent higher to US$1.3643, taking its gains for the week thus far to 0.8 per cent.

The greenback was meanwhile on track for a weekly fall of more than 0.8 per cent and was last at 98.82, languishing near a three-month low against a basket of six other currencies.

“The Treasury’s long bond buybacks are basically another example of the US government using unconventional tools to manage borrowing costs, and this comes against the backdrop of high government debt, growing fiscal deficits and policy uncertainty,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

“So I can understand why people are concerned about the operation being another headwind to investor sentiment around U.S. dollar assets. Potentially we could see such an action encourage more dollar hedging and diversification.”

In other currencies, the Australian dollar advanced 0.13 per cent to US$0.7123, while the New Zealand dollar added 0.23 per cent to US$0.5957 and was headed for a weekly rise of more than 1 per cent.

The yen slipped 0.05 per cent to 159.12 per dollar, continuing to come under pressure from wide US-Japan rate differentials.

Data on Friday showed Japan’s core consumer inflation accelerated in July from a year earlier, bolstering the case for a rate hike from the central bank.

Just a band-aid

The yield on the 30-year US Treasury note was up about 1.4 basis points to 5.2508 per cent on Friday, while the benchmark 10-year yield steadied at 4.7041 per cent after rising 4.5 bps overnight, as initial relief from Bessent’s bond buyback plan faded.

“Our skepticism is not that policymakers lack the tools to influence the long end. History shows they do, at least temporarily. Our skepticism is that today’s problem appears increasingly fiscal rather than technical,” said Goldman Sachs strategist Vitali Meschoulam in a client note.

“The (developed market) examples tell us that term premia can be compressed. The (emerging market) examples tell us that once markets focus on sovereign financing dynamics, yield suppression becomes progressively less effective.”

Concerns over the growing US debt pile, which has topped US$40 trillion, also drove some investors towards alternatives such as gold and bitcoin, which have benefitted in the past from efforts to diversify away from US assets.

Bitcoin scaled an over two-month high on Friday and last traded 1.6 per cent higher at US$73,823.43, on track for a 17 per cent weekly rise, which would mark its largest gain in 2-1/2 years.

Spot gold was similarly headed for a more than 3 per cent jump this week. REUTERS