Market News

(Bloomberg) -- The dollar neared its lowest in nearly seven months as the yen rallied, with traders looking ahead to the US Treasury's buyback announcement and inflation data later this week.

The Bloomberg Dollar Spot Index was down as much as 0.2% on Wednesday, approaching its weakest since Feb. 18. The drop was led by gains on the yen, the second-biggest component of the gauge. The Japanese currency advanced 0.5%, extending this month's gain to about 4%.

The greenback came under renewed pressure after US Treasury Secretary Scott Bessent challenged traders to test his resolve on strengthening the yen, saying when he makes market calls these days he's effectively doing so with inside information. The comments were among Bessent's most strident yet in an extraordinary campaign to bend markets to his will.

Bessent Dares Traders to Bet Against Yen: 'I Am the House'

Bessent is also set to reveal how far he's initially willing to go to restrain US bond yields through an expanded buyback program. The Treasury Department is expected to announce later Wednesday the size of the following day's operation to repurchase outstanding 10- to 20-year securities.

"To create a market impact, Bessent would need to do the first operation of greater than $4 billion, and we would not be surprised if the first operation is of a much larger size, potentially $8 billion to 10 billion," said Mohit Kumar, chief economist and strategist for Europe at Jefferies International.

Still, according to JPMorgan Chase & Co. researchers, the US Treasury will likely not provide further information on the size of its buyback operation.

Traders are also focused on Friday's US inflation data, which may help shape expectations for the Federal Reserve's policy decision next week. Money markets assign about a 60% probability that the central bank will raise interest rates by a quarter point.

Options metrics show traders remain bearish on the dollar over the short term on aggregate. They still see scope for the greenback to gain against the euro and pound, however, as elevated energy prices pose a particular headwind for the two currencies. Brent crude rose to $100 a barrel on Wednesday amid attacks between the US and Iran.