US dollar trades near multi-month lows amid debt concerns

The US dollar is hitting a rough patch, trading at levels close to its three-month lows. Investors are jittery about the US fiscal landscape, which is sending ripples through financial markets.

What’s dragging the dollar down?

In late August 2026, the US dollar index (DXY) hovered around 98.8, marking its weakest point since mid-May. The decline follows a series of financial maneuvers by the US Treasury aimed at tempering the rise in long-term interest rates. Specifically, the Treasury announced a plan to double long-end bond buyback operations to a minimum of $4 billion each.

This move is a response to the soaring 30-year Treasury yields, which recently touched 5.337%. That’s a rate not seen in the past 19 years.

The numbers to watch

The backdrop to this panic includes the US national debt ballooning beyond $40 trillion, coupled with an anticipated fiscal deficit surpassing $2 trillion for the year. The annual interest payments alone could hit $1.2 trillion.

Treasury Secretary Scott Bessent’s strategy of expanding bond buybacks might offer only temporary relief. Analysts suggest that it could merely shift the issue from the debt itself to the currency, potentially exacerbating the dollar’s woes.

Impact on the markets

With softer economic data coming from the US, like the recent decline in July’s retail sales, there are dwindling expectations for imminent Federal Reserve rate hikes. Add to that the geopolitical tensions linked to Iran sanctions.

The euro is making the most of the dollar’s misfortune, climbing above the $1.16-1.17 range. The greenback also took one of its largest weekly losses against Bitcoin in over three years.