US Dollar: Consolidation around 99.00 after buyback news – DBS

DBS Group Research economist Chang Wei Liang notes that the Dollar has firmed slightly as US Treasury yields recover, with DXY consolidating near 99.00 after the US Treasury expanded long-end bond buybacks. He argues buyback tweaks have only transient market impact without fiscal change, and warns tighter US sanctions on Iran could lift inflation expectations, US yields and the Dollar.

DXY tracks long-end yield recovery

"The USD has firmed up slightly, tracking a modest recovery in long-end US Treasury yields. "

"As we expected, DXY is consolidating around 99.00 following the US Treasury’s announcement of an expansion of long end bond buybacks."

"Without any meaningful change to the US fiscal trajectory (given that the US budget is set by Congress and not the Treasury), tweaks around buybacks can only have a small, transient impact on markets."

"Meanwhile, an expected tightening of US sanctions on Iran to be announced on Monday could pose unintended consequences, including risks of bolstering inflation expectations that lift both US yields and the USD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)