US Treasury Secretary Scott Bessent's aggressive intervention to curb a potentially damaging surge in US borrowing costs has led some investors to believe the dollar will ultimately bear the brunt. Market participants view this move as a pivotal moment, signaling that Washington is taking a more active role in suppressing borrowing expenses. Following other recent efforts aimed at containing long-term yields, this action has reignited concerns that US policy could undermine confidence in the dollar and push investors toward alternative assets.

"The dollar is undoubtedly the biggest loser," said Gerald Gan, chief investment officer at Singapore-based Reed Capital. He believes Bessent is deliberately trying to lower long-term real interest rates and sending a signal of tolerance for a weaker dollar to sustain economic momentum. "I would further diversify into assets beyond the dollar," he added. On Wednesday, the US Treasury announced it would "at least double" its buyback operations for 10- to 30-year Treasuries, citing borrowing costs that have climbed to multi-year highs, making Bessent the most interventionist US Treasury chief in decades. This marks a departure from the long-standing "regular and predictable" debt management approach — an approach Bessent himself endorsed in a November speech.

Any attempt to push down US Treasury yields could reduce the appeal of dollar-denominated debt relative to assets in other regions. If investors interpret this as a move to pave the way for further US borrowing, it could also lead to dollar depreciation. A dollar index hovered near three-month lows on Thursday, having fallen 0.8% on Tuesday. The Japanese yen, Swiss franc, and New Zealand dollar posted the biggest gains against the greenback. Amir Anvarzadeh, strategist at Singapore-based Asymmetric Advisors, noted that the buyback plan was unveiled just weeks after the US and Japan intervened jointly to support the yen, further fueling perceptions that policymakers are in panic mode.

"I don't think they intend to weaken the dollar, but rather to stabilize yields — yet the dollar is the sacrifice," he said. Industry research also views this move as bearish for the dollar. Stephen Chiu, chief FX strategist for emerging markets, said in a report that "traders may see this as an attempt to pressure market pricing around US fiscal sustainability and the Fed's inflation-fighting credibility." Long-term Treasury yields surged this week as investors demanded higher returns to lend to a government with a growing debt burden. Inflation concerns and competition from a wave of corporate borrowing intensified the pressure, pushing 30-year yields to their highest levels since 2007, even as market expectations for imminent Fed rate hikes have diminished.

Prior to Wednesday's buyback announcement, Washington had already shown signs of concern. Late last month, after the US-Japan joint intervention to support the yen, Bessent floated the idea of using Federal Reserve tools to fund further intervention if necessary. These measures are seen as reducing the risk that Japan would have to sell US Treasuries to raise dollars to defend its currency. Combined with President Donald Trump's occasional endorsement of a weaker dollar, these actions reinforce the view among some investors that Washington is increasingly willing to intervene in markets to control borrowing costs.

"Bessent would welcome these FX moves, as the Trump administration has praised the benefits of a softer dollar as a way to boost US competitiveness and reduce trade imbalances," strategists at Evercore ISI, including Marco Casiraghi, wrote in a report. Andrew Canobi, fixed income director at Melbourne-based Franklin Templeton, believes a larger story is unfolding in currency markets. He said Bessent is "essentially saying we're prepared to sacrifice some dollar strength to dampen long-term yields to a degree." "Some mechanism has to act as a safety valve." He added that the alternative would be addressing the country's structural issues — a much harder path — which would force policymakers to either control yields or allow the dollar to weaken.

The dollar has faced similar concerns before. Past large-scale bond purchase programs by the Fed raised worries that efforts to suppress yields and expand the balance sheet could lead to currency depreciation. More recently, investors trimmed dollar positions amid Trump's trade tariff threats and pressure on the Fed. Yet none of these factors have shaken the dollar's dominance in global markets. Not everyone sees an imminent threat to the dollar. Masahiko Loo, senior fixed income strategist at State Street Investment Management, said AI-driven inflows into US equities and rising oil prices still provide strong short-term support for the dollar. However, Loo noted that the latest measures strengthen the long-term case for de-dollarization and currency depreciation. He added that as AI programs and data center builds across other nations outpace the US, the unique capital flow advantages the US currently enjoys could gradually erode.

"As investors weigh US Treasury buybacks against America's widening fiscal deficit, the dollar is gradually becoming the weak link. This opens up space for Asian currencies," the strategist said. Shoki Omori, chief fixed income strategist at Deutsche Bank Japan, said providing stronger liquidity support for US Treasuries comes almost inevitably at the dollar's expense. The price action is telling: short-term Treasuries are being sold off, Fed rate hike expectations remain firm, yet the dollar is broadly weaker — suggesting investors are no longer focused solely on rate differentials but are beginning to question the overall US policy mix, he said. He expects the yen to be the biggest beneficiary over the next three to six months, as Washington's recent moves remove two major factors behind yen weakness: Japan's forced selling of US Treasuries to fund intervention, and pressure from rising US long-term yields. He also favors gold, followed by the Swiss franc and the euro, as alternatives to the dollar. "The US Treasury can buy back its bonds, but it cannot buy back the dollar," he said.