Dollar Falls to Weakest Since Mid-May Against Major Currencies; Won Strengthens to 1,386 per Dollar

Dollar drops 0.7% after U.S. Treasury expands long-bond buybacks

Yen strengthens to 158.17 per dollar

The dollar posted its biggest drop in three weeks after the U.S. Treasury unexpectedly announced an expansion of long-term Treasury buybacks, helping fuel a rebound in the bond market. The U.S. currency fell to its weakest level since mid-May.

On Aug. 19, the ICE Dollar Index fell 0.7% from the previous day to 98.922. The Bloomberg Dollar Spot Index, which measures the greenback against the currencies of the nation’s 10 largest trading partners, also fell 0.7%, leaving the dollar weaker against all of them, including the euro, yen and South Korean won.

In Seoul’s after-hours foreign-exchange market, the dollar at one point fell to 1,385.40 won, its lowest level in about 12 months.

The yen rose as much as 0.9% to 158.17 per dollar, its strongest level in a week. Japan’s currency had briefly strengthened earlier this month after joint U.S.-Japan intervention in the foreign-exchange market, but turned weaker again in less than a week. The yen is down 0.7% against the dollar so far in August.

The dollar weakened as market sentiment improved after the Treasury said it would buy older long-dated bonds that had become difficult to trade after sharp price declines. The department also said it would expand long-bond buybacks to supply liquidity to the bond market and manage government debt.

Investor anxiety had intensified amid surging federal debt, the war with Iran, inflation and a jump in corporate borrowing tied to artificial-intelligence investment. That drove a selloff in long-term bonds and pushed the 30-year Treasury yield to its highest level since 2007.

The Treasury’s latest move suggests the previous day’s yield levels on long-dated Treasuries had crossed a line the department could not accept. Treasury Secretary Scott Bessent has said stability in long-term rates is one of his main policy goals.

The Treasury’s surprise buyback announcement immediately lifted prices of long-term Treasuries. That helped calm the market by pushing the 30-year Treasury yield down about 8 basis points.

The move is also adding pressure on the dollar. Expectations that the Federal Reserve is unlikely to begin raising interest rates before December also weighed on the currency.

Bloomberg said the dollar’s decline after the Treasury announcement, despite little movement in short-term rates, suggests markets are interpreting the step as an artificial buffer against rising long-term yields.

The Trump administration has maintained that it supports a strong-dollar policy. But recent joint intervention to stem yen weakness, comments by Treasury Secretary Scott Bessent on undervalued currencies including the yen and won, and the so-called Mar-a-Lago Accord suggest otherwise.

Kim Jung-a, guest reporter, Hankyung.com, kja@hankyung.com