The US Dollar Index (DXY) experienced a significant selloff on Wednesday, falling below the 99.00s and remaining well under the 100.00 mark following the United States Treasury's announcement to at least double the size of its liquidity support buyback operations for longer-dated coupon securities, effective September 9 [1][2]. This move was designed to address the recent surge in long-end yields, and it succeeded in pushing yields lower [2].
The broad decline in the US Dollar was reflected across major currency pairs: EUR/USD extended its advance beyond 1.1675 to its highest level since late May, GBP/USD climbed past 1.3600 to a three-month peak, and USD/JPY dropped toward the 158.00 region as US yields fell [1]. The US Dollar was weakest against the Swiss Franc, losing 1.80%, and also posted notable declines against the New Zealand Dollar (-1.02%) and Euro (-0.86%) [1].
Precious metals surged in response to the weaker Dollar and lower yields. Silver (XAG/USD) traded sharply higher near $65.80, while Gold (XAU/USD) soared toward $4,500 per troy ounce [1][2]. Technical analysis for Silver showed it holding a bullish near-term bias above key moving averages, with immediate resistance at $65.92 and support at $65.29 and $64.84 [2].
The release of the July Federal Open Market Committee (FOMC) Minutes was another focal point. The Minutes indicated that policymakers still view inflation as elevated, with three officials—Lorie Logan, Beth Hammack, and Neel Kashkari—voting for a rate hike [1][2]. However, traders largely dismissed the Minutes as outdated, given softer inflation and weak jobs data since the meeting, including a 23K fall in payrolls [1][2]. Market pricing now reflects only a 34% chance of a September rate hike, down from around 60% three weeks ago, with a hold seen as the base case [2].
Looking ahead, the market is awaiting the People's Bank of China interest rate decision and Australia's July employment report, where analysts expect a modest 15K rise in jobs [1].
CONCLUSION
The US Treasury's expanded buyback plan triggered a sharp decline in the US Dollar and a rally in precious metals, with Silver and Gold reaching multi-month highs. Market participants are now pricing in a lower probability of a September Fed rate hike, favoring a more accommodative outlook. The immediate market reaction underscores the sensitivity of currencies and commodities to shifts in US monetary and fiscal policy.