Dollar slides to 3-month low as Treasury buyback plan fails to ease fiscal fears

The US dollar slumped to a three-month low on Friday, heading for a weekly decline of nearly 1%, as investors dismissed the Treasury Department's decision to double bond buybacks as a band-aid solution that fails to address America's deteriorating fiscal outlook.

The Dollar Index fell to around 98.74, its weakest level since May, after Treasury Secretary Scott Bessent's efforts to calm markets — including an appearance on CNBC Comcast Corporation ↗ 0.60% and suggestions of further buyback increases — provided only fleeting relief.finance.yahoo+2

Buybacks Viewed as Temporary Fix

The Treasury announced Wednesday it would double its planned purchases of longer-dated securities to at least $4 billion per operation from $2 billion, starting September 9. Bessent said Thursday he may further increase the government's repurchases, while also announcing a new fiscal consolidation effort with White House budget director Russell Vought at President Trump's direction.reuters+3

Markets were unimpressed. Long-term Treasury yields resumed their climb after an initial dip, with the 30-year yield hovering near 5.25% and the 10-year at 4.70%. Goldman Sachs ↘ 1.12% strategist Vitali Meschoulam wrote in a client note: "Our scepticism is that today's problem appears increasingly fiscal rather than technical".investing+3

Carol Kong, a currency strategist at Commonwealth Bank of Australia, said the buybacks represent "another example of the U.S. government using unconventional tools to manage borrowing costs" against a backdrop of "high government debt, growing fiscal deficits and policy uncertainty".cnbc+1

Fiscal Concerns Mount as Debt Tops $40 Trillion

The dollar's weakness reflects deeper anxieties about US fiscal sustainability. Federal debt surpassed $40 trillion this week, equivalent to roughly 123% of GDP. The Convera research team noted the buyback program "conveniently wraps up the exact day after voters head to the midterm polls on November 3," calling it a "poorly disguised yield-suppression effort".convera+1

DBS Group Research economist Chang Wei Liang cautioned that "without any meaningful change to the US fiscal trajectory, tweaks around buybacks can only have a small, transient impact on markets".fxstreet

Alternatives Rally as Dollar Weakens

The euro edged toward $1.17, on track for its fourth consecutive weekly gain, while sterling approached a six-month peak near $1.3650. Bitcoin ↗ 0.06% surged to a two-month high, on pace for a 17% weekly gain — its largest in two-and-a-half years — as investors sought alternatives to dollar-denominated assets. Gold climbed above $4,550, headed for a weekly rise of more than 3%.finance.yahoo+3

Daniela Hathorn, senior market analyst at Capital.com, said the move reflects "a repricing of the term premium, as investors demand greater compensation for absorbing heavy government borrowing, fiscal uncertainty and growing competition for capital from AI-related corporate issuance".investing