Traders weigh Treasury buyback plans and Middle East sanctions as Fed rate hike bets soften before PCE release.
The US Dollar Index (DXY) climbed to near 99.00 in early European trading Wednesday, recovering from recent losses. The move comes as markets await US PCE inflation data, a key Fed policy input, while digesting Treasury yield stabilization efforts and geopolitical risks.
The US Treasury announced plans to double bond buyback operations to $4 billion per auction, up from $2 billion, aiming to curb rising long-term yields. National debt exceeding $40 trillion has raised concerns, though traders remain cautious amid mixed signals on USD support. Fed rate hike expectations have also eased, with September odds now at 38.4%, down from 67% earlier this month.
Heightened Middle East sanctions under the Trump administration could drive safe-haven flows, potentially bolstering the dollar. However, broader pressure persists as markets weigh debt sustainability and Fed policy outlook.