Fresh doubts over US fiscal credibility are capping expectations for further dollar strength, according to separate notes from MUFG and Brown Brothers Harriman.
MUFG’s fiscal warning. MUFG analysts questioned the effectiveness of current US fiscal measures, pointing to concerns over government spending and rising debt levels. They argued that if investors begin to doubt the sustainability of US fiscal policy, those doubts could offset the dollar’s support from higher interest-rate expectations.
BBH on Treasury buybacks. Brown Brothers Harriman highlighted renewed attention on Treasury buybacks, a debt-management tool used to repurchase older, less liquid bonds from the open market. The Treasury has reintroduced buybacks after a long hiatus while managing a large debt-issuance schedule. BBH said the strategy may improve market functioning and lower borrowing costs over time, but it also raises questions about funding and the government’s broader fiscal position.
BBH analysts warned that if buybacks are perceived as debt monetization or a step toward fiscal dominance, confidence in the dollar could weaken. They noted the current backdrop differs from the early 2000s, when buybacks were used with lower debt levels; today’s deficits and debt stock are much larger.
Market implications. Investors are watching signals from the Federal Reserve and the Treasury for any policy shift. The dollar has been supported by rate expectations, but fiscal concerns could create headwinds and increase currency-market volatility. Safe-haven demand could still support the greenback if global risks intensify.
For crypto markets, the notes do not mention digital assets directly, but a softer or more volatile dollar is often viewed as a supportive macro backdrop for risk assets, including cryptocurrencies.
