US Dollar Suffers Sharp Selloff Amid Spike In US Treasury Yields

The US dollar plummeted on Thursday as the currency failed to rally alongside long-term Treasury yields one day after the Federal Reserve left interest rates unchanged.

The US Dollar Index (DXY), a measure of the greenback against a weighted basket of currencies, sank 0.9% to 99.99, from an opening of 100.82. The index is on track for a weekly loss of more than 1% and a monthly decline of 0.8%. Year-to-date, the dollar is still up nearly 2%.

Market watchers have attributed the buck’s sharp drop to possible Japanese intervention to prop up the yen, which recently slumped to a four-decade low against the greenback.

“There has been a sharp move lower in dollar/yen that strongly suggests official intervention,” said Roberto Cobo ‌Garcia, head of G10 FX strategy at BBVA, according to CNBC. “It appears Japanese authorities have ‌taken advantage of the bearish momentum generated by the weaker U.S. data to sell dollars and support the yen.”

This comes as long-term interest rates accelerated toward the end of the trading week.

The 20- and 30-year firmed above 5.2% for the first time since the early days of the Global Financial Crisis almost 20 years ago.

The benchmark ten-year Treasury yield also picked up modest gains, rising above 4.65%.

Investors have been pricing in higher-for-longer interest rates for the rest of 2026, but the odds of a rate hike have shifted. Traders are now split on whether the Federal Reserve will raise rates at the September Federal Open Market Committee (FOMC) policy meeting.

Traders were not too pleased that the Fed did not provide any forward guidance, something that Chairman Kevin Warsh had indicated in his post-meeting news conference.

“Prices reacted in real time to incoming information and the reduction in forward guidance may have been a factor,” Warsh said.

“Markets have made decisions because we stepped back, in part, from trying to influence those markets,” Warsh later continued. “That doesn’t mean we take them as by dictation, but we’re observing them.”

But whether the US dollar can restart its rally is unclear as stocks rebound from the sharp midweek selloff.

The USD/CAD currency pair fell 0.31% to 1.4005, from an opening of 1.4050. The USD/JPY declined 2.44% to 159.42, from an opening of 163.42.