Dollar: Consolidates Near 99.00 After Buyback News – DBS

Lead: Zhang Weiliang, Research Economist at DBS Group Research, notes that the US Treasury's expansion of long-dated bond buybacks provided a brief boost to the dollar, but the dollar index has since retreated from its earlier level near 99.00 to trade around 98.75, as the market continues to digest multiple factors.

**Buyback Impact Short-Lived; Fiscal Policy Remains Key**

The US Treasury's expanded long-dated bond buyback operations initially pushed Treasury yields higher, lending modest support to the dollar as it consolidated near the 99.00 level. However, DBS economist Zhang Weiliang believes that without substantive fiscal policy changes, the market impact of such buyback adjustments is expected to be only temporary. According to market reports, after the sentiment boost from the buyback news faded, the dollar index retreated from its earlier high, reflecting investor skepticism over the sustainability of a single technical operation.

**Geopolitical Risks Could Emerge as Potential Dollar Driver**

Zhang also warned that the US may impose stricter sanctions on Iran, which would be a potential key variable influencing the dollar's trajectory. He argues that tougher sanctions could lift inflation expectations through channels such as energy prices, thereby pushing US Treasury yields higher. This chain of logic could ultimately translate into support for the dollar, giving it fresh upward momentum. This view highlights that the forex market is currently not only pricing in monetary policy but also recalibrating for increasingly complex geopolitical risks.

**Market Awaits New Catalysts**

Previously, DBS had expressed the view that the dollar's outlook for August leaned toward weakness amid multiple factors, including a dovish Federal Reserve stance, coordinated US-Japan intervention, and easing tensions in the Middle East. At present, although the "buyback news" failed to sustain dollar strength, the risk of escalating geopolitical tensions serves as a warning to dollar bears. The market is closely monitoring inflation data and yield movements to determine whether the dollar can secure solid support around the 98.75 area or extend its prior weak pattern.