Dollar slips as Treasury buyback plan fails to calm debt worries

The US dollar is on track for a weekly decline, as investors remain unconvinced by the Treasury's latest efforts to stabilize the bond market. The greenback hovered near a three-month low against a basket of major currencies on Friday, with the euro and sterling both strengthening.

Treasury Secretary Scott Bessent indicated he may expand the government's repurchases of Treasuries, a day after the department announced it would double the size of buybacks on longer-dated securities. The move was intended to curb a sharp rise in yields, but it has done little to ease concerns about the country's growing debt load, which has surpassed $40 trillion.

Analysts suggest the interventionist approach is raising fresh questions about the credibility of US institutions. "The Treasury's long bond buybacks are basically another example of the US government using unconventional tools to manage borrowing costs," said Carol Kong, a currency strategist at Commonwealth Bank of Australia. She added that such actions could encourage more dollar hedging and diversification.

Yields on long-dated US debt remained elevated, with the 30-year note yield edging up to 5.25%. Goldman Sachs strategist Vitali Meschoulam noted that while policymakers have tools to influence the long end of the curve, the current problem appears increasingly fiscal rather than technical.

In currency markets, the euro was perched near a three-month high at $1.1685, while sterling touched a six-month peak. The Australian and New Zealand dollars also advanced. The yen slipped slightly, despite data showing Japan's core consumer inflation accelerated in July, which bolsters the case for a rate hike.

Concerns about US fiscal dynamics have driven some investors toward alternative assets. Bitcoin scaled a two-month high and is on track for its largest weekly gain in two and a half years, while spot gold is headed for a more than 3% jump this week.