The dollar index (DXY00) fell to a 2.5-month low, down 0.76%, following the US Treasury’s announcement to at least double liquidity support buyback operations for long-dated bonds to a minimum of $4 billion per operation, effective September 9. The market is currently pricing in a 35% probability of a 25 basis point rate hike at the next Federal Open Market Committee (FOMC) meeting on September 15-16.
In currency movements, the EUR/USD rose 0.77% to a 2.5-month high, while the USD/JPY dropped 0.83%. The yen’s rally to a 1-week high was supported by expectations of a Bank of Japan (BOJ) rate hike, with a 77% chance of a 25 basis point increase anticipated at the September 18 meeting. Meanwhile, precious metals also saw gains, with gold prices up 2.09% and silver up 2.19%, largely due to the dollar’s decline and increased demand as a store of value.
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