USD slammed in Asia Friday: Bitcoin, gold, FX surge as investors hedge against US fiscal credibility concerns
The dollar’s slide reflects a shift from viewing the Treasury’s buyback expansion as a stabilising measure to treating it as confirmation of how stretched US fiscal dynamics have become. Bessent’s signal that repurchases could increase further, rather than reassuring markets, appears to have reinforced the view that officials are managing a structural problem with tactical tools, a distinction Goldman Sachs has framed explicitly in warning that yield suppression becomes progressively less effective once markets fixate on sovereign financing dynamics rather than technical positioning. The scale of the rotation into gold and bitcoin, with the latter on track for its steepest weekly gain in two and a half years, signals that at least part of the market is treating this as an early stage diversification move away from dollar assets rather than routine volatility. With 30 year yields still elevated near 5.25% despite the intervention, the durability of any relief looks limited unless the underlying fiscal concerns are addressed directly.
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ICYMI on a panicking US Treasury Secretary:
- Why gold and Bitcoin surged together: What Treasury buybacks teach investors about dollar debasement
And Thursday’s US slide will renew his concern:
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Investors are voting with their feet, out of dollars and Treasuries, into gold, bitcoin and just about anything else.
Summary:
- The dollar was on track for a weekly loss as investors treated the Treasury’s expanded bond buyback plan as a temporary fix rather than a durable solution
- Treasury Secretary Scott Bessent said he may increase Treasury repurchases further, a day after the department announced it would double buybacks of longer-dated securities over the next quarter, and said he and budget director Russell Vought will pursue a new fiscal consolidation effort directed by President Trump
- The euro traded near a three-month high, sterling flirted with a six-month peak, and the New Zealand dollar was on track for a weekly gain of more than 1%, its highest level since June 1
- The Australian dollar advanced (2.5 month high) while the yen slipped, continuing to be pressured by wide US-Japan interest rate differentials
- The 30-year Treasury yield rose to around 5.2508%, while the 10-year steadied near 4.7041% after an overnight rise, as initial relief from the buyback announcement faded
- Analysts say Bessent’s buyback operation could act as a further headwind to sentiment around US dollar assets and potentially encourage more hedging and diversification
- Goldman Sachs said policymakers have the tools to influence long-end yields temporarily, but that today’s problem looks increasingly fiscal rather than technical, and that yield suppression tends to become less effective once markets focus on sovereign financing dynamics
- US government debt has topped $40 trillion, driving some investors toward gold and bitcoin, with bitcoin on track for a 17% weekly rise, its largest in two and a half years, and gold set for a weekly gain of more than 3%
The US dollar was on shaky footing and headed for a weekly loss on Friday, as investors concluded that the Treasury’s latest bond buyback effort amounts to a temporary fix rather than a genuine resolution to concerns over the country’s fiscal trajectory. The currency’s weakness came even as officials signalled they are prepared to intervene further, raising fresh questions about the credibility of the approach rather than easing them.
Treasury Secretary Scott Bessent said overnight he may expand the government’s 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 launch a new fiscal consolidation drive directed by President Trump. Neither announcement did much to halt the selloff in Treasuries or support the dollar, with investors increasingly focused on the deteriorating fiscal backdrop and renewed doubts about the credibility of US policy institutions.
Against the weaker dollar, the euro traded near a three-month high and sterling approached a six-month peak, while the New Zealand dollar was on course for a weekly rise of more than 1%, its strongest level since June 1. The Australian dollar also advanced. The yen was a notable exception, slipping slightly and remaining under pressure from wide interest rate differentials between the US and Japan.
Analysts point to Bessent’s long bond buybacks represent another example of the US government turning to unconventional tools to manage its borrowing costs, against a backdrop of high government debt, growing fiscal deficits and policy uncertainty. Investors see through the move, assessing the operation as a further headwind for sentiment toward US dollar assets, and that it could potentially encourage more hedging and diversification away from the currency.
Bond markets offered a more skeptical read on the intervention than even currency markets alone would suggest. The 30-year Treasury yield rose roughly 1.4 basis points to 5.2508%, while the 10-year yield steadied at 4.7041% after climbing 4.5 basis points overnight, as the initial relief generated by Bessent’s buyback announcement faded. Goldman Sachs said their skepticism was not about whether policymakers have tools capable of influencing the long end of the curve, noting that developed market history shows they do, at least temporarily. Rather, the concern is that today’s problem looks increasingly fiscal rather than technical in nature, pointing to emerging market precedents suggesting that once markets shift their focus to sovereign financing dynamics, yield suppression tools become progressively less effective.
The growing US debt pile, which has now topped $40 trillion, is pushing 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 mark its largest weekly rise in two and a half years. Gold was similarly firm, heading for a weekly advance of more than 3%, as investors sought assets seen as insulated from the fiscal and credibility concerns weighing on the dollar and US government debt.
This article was written by Eamonn Sheridan at investinglive.com.