98.75 Support Level Tested; Dollar Index Under Pressure Amid U.S. Debt Buyback Plan

The U.S. dollar index suffered a sharp decline on Wednesday after U.S. Treasury Secretary Scott Bessent announced a plan to buy back long-term government debt, aimed at easing upward pressure on bond yields. At the time of writing, the dollar index was trading near 98.78, having earlier tested the key support level of 98.75.

**Debt Buyback Plan Rattles Markets**

Bessent's debt buyback plan centers on repurchasing long-term government bonds ahead of schedule to smooth the pace of issuance and optimize the debt structure. The move was interpreted by the market as an official attempt to provide support to the bond market, which has been under sustained pressure recently, thereby pushing down long-end yields. However, against the sensitive backdrop of U.S. total government debt surpassing $38 trillion and rapidly rising interest expenses, the plan has also sparked deeper concerns about fiscal conditions and liquidity. Market analysts noted that while the buyback aims to stabilize the market, it could also be read as a signal of heightened debt pressure, thereby undermining the dollar's appeal.

**Dollar Faces Short-Term Downward Pressure**

In response to the news, the dollar weakened broadly against major currencies. The buyback plan lowered market expectations that the Federal Reserve would maintain high interest rates to hedge against fiscal risks, while a potential decline in long-term bond yields would narrow the yield spread between U.S. Treasuries and other countries' sovereign bonds, eroding the dollar's yield advantage. A senior trader in New York said bluntly that when investors see even routine buyback operations facing delays, confidence in the system takes a hit. This reflects the market's extreme sensitivity to any developments involving U.S. debt management.

**Market Awaits Execution Details**

At present, market focus has shifted to the specific scale and implementation pace of the buyback plan. Some Wall Street institutions believe that if the buyback is insufficient in scale, it may struggle to effectively curb the upward momentum in long-term bond yields; conversely, a large-scale buyback could intensify concerns over fiscal sustainability. Whether the dollar index can hold its support near 98.75 will depend on subsequent bond market reactions and further clarity on policy details.