The U.S. dollar fell Friday as investors continued shifting toward gold and Bitcoin amid growing concerns that Treasury Secretary Scott Bessent’s efforts to contain long-term borrowing costs could further weaken the greenback.
The DXY dollar index fell to 98.6630, bringing its decline over the month to 2.43%. while fueling concerns that the greenback’s days of being the world’s reserve currency may be waning. The dollar’s weakness follows the Treasury Department’s decision to double its purchases of longer-dated government bonds, a move that initially triggered a selloff in the currency while boosting gold and Bitcoin in what some market participants dubbed the “debasement trade.”(RELATED: America’s Fiscal Nightmare Just Got Scarier)
The Treasury said Wednesday that it would increase the maximum size of its liquidity-support buyback operations from $2 billion to at least $4 billion per operation beginning Sept. 9 and cover longer-dated Treasury securities. Bessent subsequently said the purchases could exceed $4 billion per operation.
The intervention was designed to improve liquidity in the long-term Treasury market, but investors interpreted the move as a sign that Washington was increasingly concerned about rising borrowing costs tied to the federal debt. The announcement initially pushed the dollar lower while sending Bitcoin above $72,000 and boosting gold.
The simultaneous gains in gold and Bitcoin underscored the appeal of assets not directly tied to the U.S. government’s debt market. Falling Treasury yields made non-interest-bearing assets such as gold and Bitcoin relatively more attractive.
The 10-year Treasury yield climbed back toward 4.7% Thursday, while the 30-year yield remained above 5%, as investors continued to worry about inflation and government borrowing.
The scale of the intervention was also small compared with the size of the government’s obligations. The national debt crossed $40 trillion Wednesday, while the federal deficit was expected to exceed $2 trillion.