The dollar fell on Friday as investors concluded that the Treasury’s expanded bond buyback plan was a temporary fix rather than a durable response to concerns over the United States’ fiscal trajectory. The currency weakened even after officials signaled they may intervene further, a move that instead appeared to raise new questions about the credibility of the policy approach.

Treasury Secretary Scott Bessent said overnight that he may expand Treasury repurchases further, a day after the department confirmed it would double the size of buybacks in longer-dated securities over the coming quarter in an effort to contain a sharp rise in yields. Bessent also said he and White House budget director Russell Vought would begin a new fiscal consolidation drive directed by President Trump. Neither announcement was enough to stop the selloff in Treasuries or support the dollar, as investors focused more on the deteriorating fiscal backdrop and renewed doubts about US policy credibility.

Against the weaker dollar, the euro traded near a three-month high and sterling approached a six-month peak. The New Zealand dollar was on track for a weekly gain of more than 1%, its strongest level since June 1, while the Australian dollar also advanced. The yen was a notable exception, slipping slightly and remaining under pressure from wide US-Japan interest rate differentials.

Bond markets also offered a skeptical response. The 30-year Treasury yield rose to around 5.2508%, while the 10-year yield steadied near 4.7041% after an overnight increase, as the initial relief triggered by the buyback announcement faded.

Analysts said Bessent’s long-bond buyback operation is another example of the US government using unconventional tools to manage borrowing costs in the context of high debt, widening deficits and policy uncertainty. They said investors appear to view the move as a further headwind for sentiment toward US dollar assets and as a possible trigger for additional hedging and diversification away from the currency.

Goldman Sachs said policymakers do have the tools to influence long-end yields temporarily, and that developed-market history shows such measures can work in the near term. But the bank argued that the current problem increasingly looks fiscal rather than technical, warning that yield suppression becomes less effective once markets focus on sovereign financing dynamics rather than positioning in the market.

The growing US debt burden, which has now topped $40 trillion, has pushed some investors toward alternative stores of value that have historically benefited from dollar diversification trades. Bitcoin scaled a more than two-month high on Friday and was on track for a 17% weekly gain, which would be its largest weekly rise in two and a half years. Gold was also firm and heading for a weekly advance of more than 3%, as investors sought assets seen as more insulated from concerns over US fiscal credibility and government debt.

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ICYMI on a panicking US Treasury Secretary:

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And Thursday's US slide will renew his concern:

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