Dollar Pressured by Capped Yields - OCBC

The dollar index is trading around 98.763, after being dragged down earlier to its lowest level since May by an expanded U.S. Treasury buyback program and falling long-term Treasury yields. OCBC strategists Simon Moh Siong and Christopher Wong believe that subdued yields and a still-on-hold Federal Reserve will continue to weigh on the dollar in the near term.

**Capped Yields Limit Dollar Rebound**

Strategists note that the expanded U.S. Treasury buyback program has pushed long-term yields lower, a key driver of the dollar's recent weakness. Although nominal yields have edged up, real yield gains remain limited, meaning the dollar lacks sustained support from rate differentials. Against this backdrop, the dollar index is struggling to gain meaningful upward momentum.

**Fed on Hold Reinforces Weakness**

OCBC believes the Fed remains in a wait-and-see mode with no signs of policy rate adjustments, further undermining dollar bullish sentiment. Market focus has shifted to next week's speech by Fed Chair Warsh at Jackson Hole, with investors seeking clues on the future policy path. Until clear signals emerge, the dollar is likely to remain under pressure.

**Jackson Hole Signals in Focus**

According to OCBC strategists, the dollar's trajectory in the near term will remain constrained by capped yields and the Fed's policy stance. If the Jackson Hole speech fails to deliver a hawkish surprise, the dollar's weak posture may be hard to reverse. Market reports indicate cautious trading sentiment, with the dollar index hovering around 98.763 and rebound momentum limited.