The Dollar Index (DXY) fell to a 2.5-month low on Wednesday, dropping by 0.80% after the U.S. Treasury announced plans to double the maximum size of liquidity support buyback operations for longer-dated bonds to at least $4 billion, effective September 9. This move, along with lower U.S. Treasury yields, weakened the dollar’s interest rate differentials.
Additionally, precious metals saw a significant rally, with October COMEX gold rising by 2.81% and September COMEX silver increasing by 2.79%, driven by the weaker dollar and lower global bond yields. The markets are currently pricing in a 32% probability of a 25 basis point rate hike at the upcoming Federal Open Market Committee meeting on September 15-16, a 96% probability for the European Central Bank on September 10, and a 67% chance for the Bank of Japan on September 18.
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