United States Dollar Index recovers to near 99.00 ahead of US PCE inflation data

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 99.00 in the early European trading hours on Wednesday. The DXY recovers some lost ground but remains at risk as traders digest renewed US efforts to ease pressure on longer-dated Treasury yields. Last week, US Treasury Secretary Scott M. Bessent announced the US Department of the Treasury will double its bond buyback operations to at least $4 billion per operation, up from the current $2 billion maximum, to stabilize surging long-term borrowing costs. This action has sparked concerns as national debt surpasses $40 trillion. CNBC reported the Treasury could use part of its cash balance to buy back longer-dated bonds to help steady long-term yields, though traders see multiple factors that may keep the USD under pressure through the year. US President Donald Trump’s administration expanded secondary sanctions on entities and countries maintaining business ties with Iran, potentially boosting Middle East sanctions and safe-haven flows for the USD. Traders have lowered bets on an imminent Federal Reserve (Fed) interest rate hike, with markets now pricing in a 38.4% chance of a 25 basis points (bps) rise in September, down from 67% earlier. The US July Personal Consumption Expenditures (PCE) Price Index data will be released later on Wednesday. On Friday, Fed Chairman Kevin Warsh’s speech in Jackson Hole, Wyoming, could provide hints on US interest rate outlook. Hawkish remarks from Fed policymakers could lift the DXY in the near term. Strategists at Scotiabank warn the Dollar’s recent stabilization may be fragile without clearer guidance from US officials on fiscal consolidation plans and Fed reaction functions. Technical analysis shows the DXY maintains a bearish bias, with support at 98.65 and resistance at 99.55–100.40. The USD remains vulnerable without definitive policy signals from Jackson Hole.