DXY Tests 98.75 Support as Treasury Buyback Sinks Dollar to New 3-Month Lows

The US Dollar Index (DXY) is testing three-month lows near 98.75 after sliding 0.86% on Wednesday, its steepest one-day drop in weeks. The selloff followed Treasury Secretary Scott Bessent’s announcement that the department will double the size of its long-term bond buyback operations to ease pressure on Treasury yields. Deutsche Bank strategists called the move a dollar-negative signal, and the index remains under pressure as traders assess how far the decline can extend.

Treasury Buyback Plan Hits the Dollar

The Treasury said Wednesday it will raise the cap on liquidity-support buyback operations for 10-to-20-year and 20-to-30-year Treasury securities from $2 billion to at least $4 billion per operation, effective September 9. The move came after the 30-year Treasury yield touched a 19-year high above 5.33% earlier in the week; it fell roughly 9 basis points following the announcement.

Deutsche Bank’s George Saravelos described the buyback as a soft-form financial repression policy aimed at containing the long end of the yield curve, arguing that if Treasury prices aren’t allowed to adjust lower, the burden shifts to a weaker dollar for foreign bondholders. Citigroup strategists echoed the view, calling the expanded buyback program a significant signal likely to stabilize the back end of the curve.

• DXY closed 0.86% lower Wednesday, its weakest close since mid-May
• The 30-year Treasury yield fell from 5.337% to roughly 5.19% after the announcement
• July’s FOMC minutes, also released Wednesday, had little market impact

DXY Technicals Point to Oversold Levels

Dollar Index Spot trades at 98.75, extending a bearish near-term bias after Wednesday’s sharp decline. Momentum indicators remain deep in bearish territory, though the 14-day Relative Strength Index has reached oversold levels across most timeframes, suggesting the move may be due for consolidation or a bullish correction. Bears have so far been capped just above the late-May low at 98.75; a break below that level opens the door toward the April-May trading range floor near 97.65-97.80, since no clear support levels sit between those zones.

On the upside, recovery attempts are likely to meet resistance first near 99.30, the August 16 low, ahead of Wednesday’s high near 99.70 and the top of the past two weeks’ trading range, just below the 100.00 psychological level.

Conclusion

The Dollar Index’s slide to 98.75 reflects a policy-driven repricing rather than a data-driven one: the Treasury’s buyback expansion, not the Fed’s July minutes, drove Wednesday’s move. Oversold RSI readings suggest some near-term stabilization is possible, but a decisive break below 98.75 would expose the index to the 97.65-97.80 zone, while any recovery is likely to stall well below the 100.00 level unless the underlying yield dynamics shift.