Dollar at weakest level in seven months

Bloomberg - The dollar ended on Thursday at its weakest level in seven months as the yen rose, after Treasury Secretary Scott Bessent challenged traders to test his resolve to support the Japanese currency.

The Bloomberg Dollar Spot Index fell less than 0.1%, closing at its lowest since February 17 and marking a third consecutive day of decline. Meanwhile, gains in the yen weighed on the US currency. The Japanese yen rose 0.2%.

Jane Foley, head of foreign exchange strategy at Rabobank, said, “It’s clear that yen gains explain part of the index’s weakness,” adding that the Treasury’s announcement in August of bond buybacks and global interest rate hike expectations are also likely to hurt the dollar’s appeal.

Alex Cohen, foreign exchange strategist at Bank of America, said, “The dollar rose slightly following the announcement of the $6 billion figure, as the market seemed to be preparing for something larger.” He added, “This may ease some current concerns about a Treasury adopting the most aggressive level of active intervention.”

Before the announcement of the buyback size, the US currency came under renewed pressure after Bessent said he “is now the decision-maker, so when we intervene in the Japanese yen, I have a very good sense of what the Japanese will do, what the Bank of Japan will do, and what Japanese policymakers will do.”

In late July, the United States and Japan collaborated in a rare intervention to buy yen, temporarily boosting the Japanese currency. Bessent’s remarks were among his strongest to date, as part of an extraordinary campaign to bring markets to heel.