Euro Surges as Dollar Faces Treasury Pressure
The Euro continued to strengthen against the US dollar during Thursday's trading (August 20), with the EUR/USD pair moving slightly above the 1.1700 mark. The pair has surged approximately 1.13% from Wednesday's lows amidst mounting pressure on the greenback.
The dollar's weakness was primarily driven by the US Treasury Department's decision to expand its long-term government bond buyback program. Starting September 9, the maximum size of buyback operations aimed at supporting liquidity will be doubled from around US$2 billion to at least US$4 billion per operation.
This move aims to alleviate pressure on long-term Treasury yields, which had spiked sharply in recent sessions. As bond prices rise due to increased demand from the buyback program, yields tend to fall, thereby reducing the US dollar's appeal relative to other major currencies.
Pressure in the bond market had previously intensified after Treasury Department data revealed that total US government debt had surpassed US$40 trillion for the first time. This massive debt burden prompted investors to demand higher returns for holding US debt securities, causing long-term yields to surge to multi-year highs.
However, the buyback policy rapidly shifted market sentiment. Falling Treasury yields weakened fundamental support for the dollar, giving the euro room to extend its rally. This movement also indicates that the market is becoming increasingly sensitive to fiscal policy and US government efforts to maintain bond market stability.
Newsmaker Analysis: EUR/USD currently maintains bullish momentum as long as the dollar remains under pressure and Treasury yields do not spike again. The 1.1700 area is a crucial level to hold; if the euro can stay above this mark, the potential for further gains remains. Conversely, a rebound in yields or signals of a more hawkish Federal Reserve policy could trigger profit-taking and cap the euro's rise. (arl)
Source: Newsmaker.id
