News Maker 23

The US dollar remained under pressure during the European trading session on Friday (August 21), heading for a weekly decline of nearly 1%. The Dollar Spot Index (DXY) fell approximately 0.2% to the 98.74 level—nearing a three-month low—as investors renewed their scrutiny of US fiscal health amidst bond market pressures.

The greenback's weakness persisted despite the US Treasury Department's decision to increase its long-term Treasury buyback program to at least US$4 billion per operation starting in September. While that move initially boosted bond prices and suppressed yields, the effect was short-lived; the market quickly refocused on the US government's mounting debt, which has surpassed US$40 trillion.

Treasury yields have since resumed their upward climb, with the 10-year yield hovering around 4.70% and the 30-year yield nearing 5.25%. This rise in yields has failed to support the dollar, as investors now view it as a sign of growing concern regarding US fiscal sustainability rather than an attractive return on investment.

Pressure on the dollar has paved the way for other major currencies to strengthen. The euro is trading near a three-month high and is on track for its fourth consecutive weekly gain, while the British pound has risen about 0.8% over the week, approaching a six-month high.

The Japanese yen also posted modest gains after data showed Japan's core inflation rising to 1.8% in July, accompanied by solid business activity. These conditions have reinforced expectations that the Bank of Japan could raise interest rates again to around 1.25% in September.

Newsmaker Analysis: The dollar's current weakness is driven more by escalating concerns over US fiscal health than by interest rate factors. As long as the market remains skeptical about the effectiveness of the Treasury's measures to curb yields, the downward pressure on the DXY is likely to persist. This situation acts as a positive catalyst for the Pound Sterling and the Euro, particularly if expectations for Federal Reserve interest rate cuts diminish and the European economy continues to demonstrate resilience. (arl)

Source: Newsmaker.id