The U.S. Treasury’s announcement that it would increase purchases of long-term Treasuries has triggered a renewed move toward a weaker dollar, with gold and cryptocurrencies being bought. Uncertainty is expected to persist for the dollar-yen exchange rate, depending on the political calendar.
The U.S. Treasury’s indication that it plans to increase purchases of long- and super-long-term Treasuries has been accompanied by a weaker dollar and rising prices for gold and cryptocurrencies. Markets are focused on a possible resurgence of de-dollarization, although some believe it has not yet gathered significant momentum.
While demand for non-cash assets such as gold and bitcoin is rising as the dollar index falls, views on the decline in geopolitical risks and the outlook for long-term real interest rates remain mixed. The sustainability of the dollar’s weakness is often said to depend on the political calendar.
Following the announcement, the Treasury signaled its intention to restrain movements in long-term interest rates, and the U.S. administration’s response is influencing market expectations. Some observers also say that a resurgence of de-dollarization could be seen over the medium term.
An environment of dollar weakness could emerge that supports a correction of yen weakness. If developments in Japan’s fiscal policy and the Bank of Japan’s policy stance produce factors that curb further yen weakness, the outlook for the dollar-yen exchange rate could become even more uncertain.