Key facts
- The U.S. dollar weakened as investors questioned the effectiveness of Treasury bond buyback efforts.
- The Treasury Department announced it would double buybacks of longer-dated securities.
- Secretary Scott Bessent suggested further buybacks and a new fiscal consolidation effort.
- The dollar index was on track for a weekly loss, nearing a three-month low.
- Gold and bitcoin saw gains as investors sought alternatives to U.S. assets amid fiscal concerns.
The U.S. dollar weakened and was set for a weekly loss as investors expressed skepticism about the Treasury Department's efforts to manage borrowing costs through bond buybacks. Secretary Scott Bessent announced plans to double buybacks of longer-dated securities and initiate a new fiscal consolidation effort, but these moves did little to stem the selloff in Treasuries or boost confidence in the dollar.
Analysts noted that the Treasury's use of unconventional tools comes amid high government debt, growing fiscal deficits, and policy uncertainty, potentially creating headwinds for dollar assets. The euro and sterling saw gains against the weaker dollar, with the euro approaching a three-month high and sterling nearing a six-month peak.
Goldman Sachs strategist Vitali Meschoulam commented that while policymakers have tools to influence long-term yields temporarily, the current problem appears increasingly fiscal rather than technical. Concerns over the U.S. national debt, which has surpassed $40 trillion, also prompted some investors to seek alternatives like gold and bitcoin, both of which experienced significant gains for the week.
Bitcoin reached a more than two-month high, on track for its largest weekly gain in 2-1/2 years, while spot gold was also headed for a substantial weekly jump.