Global FX Trader Tinker Taylor Holder Why

Economics Research 21 August 2026 | 8:47PM BST

Our thoughts on USD, US Treasury Buyback, MXN, CAD, TRY, NJA FX Kamakshya Trivedi | & Jackson Hole Goldman Sachs International n USD: Tinker Taylor Holder—Why the Dollar is weaker. We think several factors Michael Cahill | are combining to weaken the Dollar. First, there is a supply/demand imbalance in Goldman Sachs International the Treasury market, but officials have demonstrated they do not want prices to adjust (yields to rise) to attract that demand. By attempting to hold the price of Danny Suwanapruti | longer-duration securities from falling, this leaves the Dollar as the remaining Goldman Sachs (Singapore) Pte

release valve to encourage foreign inflows to finance the US’s current account. Teresa Alves | Second, FOMC communications have generally revealed a preference from the Goldman Sachs International majority of voters to keep the policy rate on hold. While there is certainly a Karen Reichgott Fishman strong case for that in the realized data and its expected trajectory, this bias still | matters considerably for market pricing and can be seen in a rising term Goldman Sachs & Co. LLC

premium, steeper curve, and weaker Dollar. After a series of supply setbacks and Stuart Jenkins | spending surprises, it is sensible for the market to price some discomfort with Goldman Sachs International policy settings that are far below what some Taylor rule specifications would Victor Engel imply via a weaker currency as it implies a high bar for the data to push for a | different policy approach. Third, we believe that the Treasury’s more activist Goldman Sachs International

approach to tinker with its policy tools, including this week’s unusual buyback Lexi Kanter | announcement as well as its prior decision to intervene in EUR/JPY, is likely also Goldman Sachs & Co. LLC weighing on the Dollar beyond what each action implies for the policy outlook. As we wrote following the Yen intervention, unconventional policy choices can amplify questions around institutional reliability even if those policies are intended to aid market functioning. It is sensible for any bondholder to be wary if an issuer seems overly protective and sensitive to market conditions. While the Dollar is under significant pressure from the combination of these factors, we think it is also important to note a few notable differences from the post-Liberation Day Dollar reaction. First, some of the factors contributing to the initial market moves—including private sector debt issuance—are positive for the currency as it reveals investors still see strong return prospects. Second, in the event of more extreme moves, we think markets would still price that US officials would respond with more macro solutions if required. Third, the post-Liberation Day market response was fueled by reduced foreign appetite for US assets in part because of more uncertain policy, and because FX correlations led to stronger hedging demand. Those factors are so far not a feature of the policy shifts this time. Still, we would expect the Dollar to weaken further next

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week if Chairman Warsh and other FOMC participants do not signal some unease with recent market signals. n Buyback Unpack. FX markets were at the centre of the reaction to Wednesday’s US Treasury buyback announcement, and we think it is striking that despite the subsequent reversal higher in bond yields and the consolidation-focused comments from Treasury Secretary Bessent on Thursday, the FX imprint has largely stuck. We see a number of competing forces behind the price action on Wednesday. First and foremost, we see broad Dollar weakness as reflective of a return to episodic US policy volatility that has been a key feature of Dollar dynamics over the past two years, and of an effective shift in the burden of recent long-end pressures from USTs to the Dollar (see USD bullet). Second, we see renewed policy uncertainty as key to the clear outperformance in…