The US Treasury doubled the amount conducted per operation in its long-term Treasury buybacks, sending the dollar lower. Market participants are comparing the move with the Bank of Japan’s yield-control measures.
The US Treasury announced this week that it would double the amount conducted per operation in its buybacks of long-term Treasuries from the market. The dollar fell in response, reaching a three-month low in trading on the 21st. According to Bloomberg, the move became a major market-moving factor.
Market participants have begun debating comparisons between the buybacks and yield-control measures such as the Bank of Japan’s yield curve control (YCC). Some view Japan as an example of how maintaining yield controls contributed to currency weakness, while others have pointed out that the US is following a similar path.
Bloomberg’s Robin Brooks described the move as the “clearest sign yet” of similarities between US and Japanese monetary policy. Barrow, however, took a critical view, saying that buybacks alone could not address the problem of fiscal deficits. There has also been an assessment that the US government avoids affecting the dollar exchange rate in foreign-exchange interventions by intervening through the euro rather than the dollar.