The dollar index edged up 0.1% on Thursday, recovering some ground after Wednesday's 0.8% decline triggered by the Trump administration's unexpected decision to expand US Treasury buybacks. The greenback's rebound came as the yen weakened, pushing the USD/JPY pair above the 159 threshold.
The 30-year Treasury yield climbed to 5.27% during Thursday's session, retracing back to levels seen before the Treasury Department's Wednesday announcement of an expanded repurchase program. Howard Du, a strategist at TD Securities in New York, noted that market participants remain skeptical about Treasury Secretary Bessent's ability to effectively cap long-end yields. He added that overnight headlines regarding US-Iran tensions also bolstered the dollar by pushing oil prices higher.
Meanwhile, Walmart's quarterly sales fell short of expectations, a rare miss that could raise concerns about the leading retailer slowing along with the decelerating US economy. Win Thin, chief economist at Bank of Nassau 1982, suggested this confirms that July's weak retail sales data was not a one-off event. Despite the dollar's short-term rebound, bearish sentiment continues to spread across the market.
According to compiled data, the dollar's three-month risk reversal indicator turned negative for the first time since February, with Citigroup's FX strategists signaling a shift toward short-term bearish positioning on the greenback. However, Chi Chen, co-manager of BlackRock's Total Return Fund, pointed out that the expanded Treasury buyback program signals the US Treasury is adopting a more proactive policy stance.
Among major currency pairs, USD/JPY rose 0.6% to 159.14. Sarah Ying and colleagues at CIBC Capital Markets strategists wrote in a Thursday report that for the yen, the Treasury's interventionist stance under Bessent will make markets more cautious when testing the 160.00 level. They added that they remain structurally bullish on USD/JPY strength, as the yen continues to be driven by external factors while the Bank of Japan's rate cycle remains reactive rather than proactive. Elsewhere, USD/CAD slipped 0.1% to 1.3790, while EUR/USD held steady near 1.1674.