(Bloomberg) -- Treasury Secretary Scott Bessent's bold intervention to stem a potentially damaging rise in US borrowing costs has some investors saying the dollar will ultimately pay the price.
Most Read from Bloomberg
Bessent Deploys Debt Buybacks in Sign of Concern Over Yield Rise
Natalie Harp, Trump's Gatekeeper, Is at Center of Senator Jon Ossoff Clash
PlayStation Reboots 'Horizon Hunters Gathering' as Live-Service Strategy Struggles
Some market participants see the move as a turning point, with Washington taking a more active role in keeping its borrowing costs down. Coming after other recent efforts to rein in long-term yields, it's reviving a concern that US policy could weaken faith in the dollar and push investors toward alternatives.
"The dollar certainly is the biggest casualty," said Gerald Gan, chief investment officer at multi-family office firm Reed Capital in Singapore. He sees Bessent as deliberately pushing down long-term real rates and signaling a tolerance for a weaker dollar to keep the economy afloat.
"I would further diversify away from the dollar," he added.
The Treasury said Wednesday it would "at least double" planned purchases of outstanding 10- to 30-year bonds after borrowing costs surged to multi-year highs, making Bessent the most interventionist Treasury chief in decades. The move marked a departure from the department's longstanding "regular and predictable" approach to debt management — something Bessent himself endorsed in a speech in November.
Any attempt to engineer US yields lower can reduce the attractiveness of dollar-denominated debt relative to assets elsewhere. And if investors see the goal as easing the path for additional American borrowing, that can also have the impact of devaluing the US currency.
A Bloomberg gauge of the greenback fell to a three-month low after the announcement before edging up 0.1% on Thursday. The yen, Swiss franc and New Zealand dollar were among the biggest gainers against the US currency.
The buyback plan comes just weeks after the US joined Japan in intervening to support the yen, adding to the sense that policymakers are panicking, said Amir Anvarzadeh, strategist at Asymmetric Advisors in Singapore.
"I don't think they are trying to weaken the dollar so much but to try to stabilize the yields — but the sacrificial lamb is the dollar," he said.
Audrey Childe-Freeman, chief FX strategist at Bloomberg Intelligence, also sees the move as potentially bearish for the dollar. "Traders are likely to view this as an attempt to suppress market pricing around US fiscal sustainability and the Fed's inflation-fighting credibility," she wrote in a note.