The US dollar index fell below 99 on Wednesday, its lowest level since late May, after the US Treasury announced it would double the size of its long-term buyback program. The move signaled that the Treasury is prepared to intervene more actively in the bond market to cap long-term yields, effectively increasing the potential supply of dollar liquidity to the global financial system via the Treasury General Account.
This step aligns with earlier efforts to contain the surge in long-dated bond yields worldwide, which has often prompted foreign firms to sell dollar assets to support their domestic currencies. Both Japan and the United States have recently intervened in foreign exchange markets, contributing to a sharp drop in the dollar index.
Against this backdrop, Treasury Secretary Bessent called for higher limits on the Federal Reserve’s FIMA repo facility, allowing foreign central banks and monetary authorities to access dollar liquidity without resorting to direct FX intervention. At the same time, minutes from the latest FOMC meeting confirmed that some policymakers still see a case for further interest rate increases.
