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US Treasury Secretary Scott Bessent’s remarks at the G20 summit in Asheville weighed on the USD, offsetting some of the hawkish momentum generated by Fed Chairman Kevin Warsh’s Jackson Hole speech. The DXY Index fell 0.3% overnight, paring last Friday’s 0.6% gain, even as markets raised the probability of a September 16 Fed hike to 65% from 36% before Jackson Hole. While Bessent declined “to speculate on what the Fed may do or not do” at this month’s FOMC meeting, he noted that the Fed had traditionally avoided raising rates during a supply shock unless second- or third-order effects emerge.
Bessent also defended the decision to expand the Treasury’s bond buyback programme. While acknowledging that the Treasury cannot artificially change bond equilibrium, it must "send signals" and ensure that "markets cannot dictate policy.” The remarks sit uneasily alongside Warsh’s view of financial markets as important information aggregators that provide signals to policymakers. That tension was again visible in the bond market. The rise in the US Treasury 30Y yield overnight did not support the USD as it had in the previous three sessions. Instead, yield pushed back above 5.20% towards the 5.30%-plus levels that prompted the Treasury/s intervention on August 18.
Bessent paired his defence of buybacks with a call for a stronger JPY. He explicitly signalled confidence in impending Japanese monetary tightening, stating: "I have information that the market doesn't have, and it's my belief that the Japanese government and the Bank of Japan will do the things that will lead to a stronger JPY". USD/JPY slipped 0.2% to 159.74 overnight after five consecutive sessions of gains. Markets were already nervous about intervention after USD/JPY breached 160 last week. Bessent’s comments revived the link between efforts to stabilize the JPY through joint US-Japan intervention and Washington’s concerns over rising US long-term bond yields.
Bessent also urged G20 nations to reassess their trade relations with China to address global trade imbalances. He argued that the world cannot accommodate a China running a $1.2 trillion trade surplus while attempting to export its way out of its weak domestic demand. Instead, he called for a structural rebalancing toward stronger consumer demand while the US bolsters its manufacturing base. His remarks come ahead of a Trump-Xi Washington Summit on September 24 and an EU-China trade deadline in October to address Brussels’ complaint about an undervalued CNY widening EU trade deficits and hurting European competitiveness.
Taken together, Bessent’s remarks challenged the USD on several fronts. He defended the Treasury’s moves to contain disorderly moves in long-term yields, keeping the policy lap debate alive and weakening the USD’s traditional support from higher yields. While his support for the JPY is explicit, his implicit preference for stronger Asian currencies was reflected through China’s role in global imbalances. Still, the USD may continue to struggle to find a clear direction, with incoming US data, such as this Friday’s nonfarm payrolls, determining which side gains the upper hand.
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“I slept and dreamt that life was joy. I awoke and saw that life was service. I acted and behold, service was joy.
Rabindranath Tagore
Today in history
The wreck of the RMS Titanic was discovered on September 1, 1985, by a joint American-French expedition.
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Related Insights
- DEER: Policy and the undervalued JPY 22 Sep 2026
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- Hoping for relief to shift from the Fed to geopolitics22 Sep 2026
Related Insights
- DEER: Policy and the undervalued JPY 22 Sep 2026
- USD Rates: Optimistic start22 Sep 2026
- Hoping for relief to shift from the Fed to geopolitics22 Sep 2026