USD tumbles, has worst day in four months
The U.S. Dollar is trading in mostly weaker ranges following a session marked by its worst daily decline since April 30th, knocking its overall value to the lowest level since May 12th, according to the Bloomberg Dollar Spot Index.
A surprising move from the U.S. Treasury Department eased the climb in yields, which had reached their highest levels in decades. Secretary Scott Bessent announced an increase in buybacks of long-dated bonds, incentivizing a rally in Treasuries while pushing long-end yields lower. Because lower long-dated yields reduced the return on financing U.S. debt for international investors, the value of the Buck came under significant downward pressure.
Yesterday represented the fourth losing trading session for the U.S. Dollar in five days. Despite the release of the Fed Minutes, which showed mixed views about increasing interest rates for the remainder of the year, markets did not hesitate to move away from the Greenback.
Meanwhile, stocks declined, and S&P 500 futures are slipping as a rebound in oil prices worries traders about ongoing inflationary risks. Brent crude oil prices climbed for a fifth consecutive day. The White House revealed a package of measures meant to further choke the Iranian economy in order to get Tehran to concede and sign an agreement. Economists and analysts agree that this clouds the prospects for a more immediate breakthrough that could put the armed conflict behind. The end of the week looks volatile, while data-wise, the main item to look forward to is tomorrow’s Purchasing Managers Index for August.
What to Watch This Week…
- S&P Global PMIs, Friday, 9:15AM
- USA Online is always open
The complete Economic Calendar can be found here.
EUR
The Euro surged against the U.S. Dollar and is trading near its strongest levels since the start of May, while the neighboring Swiss Franc had a 1.8% appreciation, bringing it to its strongest point against the USD since mid-June. The latter benefitted from the U.S. Treasury rally, regaining its status as a safe-haven asset amid market turmoil. Without much in the way of economic indicators, the injection of liquidity for Treasuries has truly affected the perception of U.S.-backed debt as a source of high-premium reward for investors. For now, the momentum has slowed down a bit, but it is possible the Buck has further room for losses, especially as some interpret the Fed’s notes as a sign that borrowing costs will remain unchanged for 2026.
MXN
The “Super Peso” effect continues, with the value of the MXN improving further and cementing it as the strongest against the U.S. Dollar since May 2024. Along with the Peso, other emerging-market currencies flourished, including the Korean Won (KRW), Colombian Peso (COP), Polish Zloty (PLN), and South African Rand (ZAR), all of which improved by over 1.0%. There could be some more surprises left as the week is not yet done, but for now, the Buck is facing major challenges after yet another significant intervention from active U.S. Treasury leadership.