The U.S. dollar slipped on Friday, trading near a three-month low against the euro as investors remained concerned about the U.S. Treasury’s plans to expand its purchases of longer-dated government debt.

Treasury Secretary Scott Bessent indicated that the government could increase its Treasury buybacks further, following the department’s recent announcement that it would at least double purchases of longer-term debt. The strategy is aimed at easing pressure on bond yields, but investors remain skeptical about its effectiveness.

Long-term U.S. Treasury yields have risen sharply this week, with the 30-year yield reaching its highest level since 2007. Analysts have pointed to concerns over the U.S. fiscal outlook, increased government debt issuance, geopolitical tensions and uncertainty surrounding Federal Reserve policy.

The rise in Treasury yields has also created additional pressure on the dollar. While the Treasury seeks to contain borrowing costs, markets are increasingly concerned that fiscal pressures could instead be reflected in a weaker U.S. currency.

The dollar index remained close to recent lows, while the euro strengthened toward its highest level since May. Sterling also continued to gain against the dollar, reflecting broader weakness in the greenback.

Yen Strengthens on Inflation Data

The Japanese yen gained against the dollar after data showed that Japan’s core consumer inflation accelerated in July. The stronger inflation figures have reinforced expectations that the Bank of Japan could raise interest rates, providing support to the yen.

Markets are now closely watching upcoming central-bank signals, particularly the Federal Reserve’s Jackson Hole symposium, where investors will look for further clues about the direction of U.S. monetary policy.

Market Outlook

The dollar’s near-term direction will likely depend on a combination of U.S. Treasury yields, Federal Reserve policy expectations, fiscal concerns and global interest-rate differentials.

For forex traders, continued weakness in the dollar could keep major currency pairs such as EUR/USD, GBP/USD and USD/JPY in focus, while shifts in U.S. yields could remain a key driver of currency-market volatility.