US Dollar Index Holds Near 98.9 as Treasury Debt Concerns Mount

The US Dollar index (DXY) held at 98.94 on August 24, 2026, marking a 0.14% gain from the previous session but remaining under pressure after a 2.55% decline over the past month [1]. The currency is currently balancing between hawkish Federal Reserve policy signals and a sharp rise in Treasury yields that has heightened concerns over the US government’s debt burden, which recently surpassed $40 trillion [1, 3].

Debt strategy and market pressure

The dollar’s recent volatility stems from the Treasury’s decision to increase the volume of its buyback operations for longer-dated government securities [3]. Treasury Secretary Bessent described this strategy as a “Treasury twist,” intended to influence the yield curve and manage borrowing costs [1]. This move triggered a drop in long-term bond yields, which weakened the dollar’s appeal while simultaneously boosting demand for safe-haven assets [3].

While the dollar remains up 0.52% over the last 12 months, it is trading significantly below its all-time high of 164.72 reached in February 1985 [1]. Analysts at Commerzbank note that the long-term outlook for the dollar faces risks from firmer inflation, driven in part by increased import tariffs, and potential government actions that could complicate the Federal Reserve's ability to respond to economic shocks [2].

Fed policy and global sentiment

Market participants are scrutinizing the latest FOMC minutes for evidence of how close policymakers remain to further rate hikes [4]. Although many officials noted that a hike might be necessary if inflation cooling proves insufficient, weaker-than-expected labor and inflation data released after the July meeting have caused markets to reduce expectations for a rate increase by year-end [3, 4].

The dollar’s stabilization has coincided with a retreat in the Euro and British Pound from recent highs, despite favorable fundamental backdrops for both currencies [3]. Meanwhile, geopolitical tensions in the Middle East—including expected new US sanctions against Tehran—have added a risk premium to oil prices and provided temporary support for the dollar as a safe-haven asset [1, 3].

What to watch

• Fed Signals: Investors are monitoring remarks from Fed Chair Kevin Warsh at the Jackson Hole economic symposium later this week for further policy guidance [1].
• Inflation Data: The upcoming July PCE inflation report is a key focus for market participants attempting to gauge the likelihood of future rate adjustments [1].
• Economic Indicators: Volatility may increase following the release of weekly initial jobless claims and the Philadelphia Fed Manufacturing Index [3].

Whether the dollar can sustain its current level or resume its recent decline depends on whether upcoming economic data forces a repricing of Fed rate expectations. With the national debt exceeding $40 trillion, the effectiveness of the Treasury’s buyback strategy in anchoring long-term yields remains a critical variable for currency markets [3].