Dollar at 3-Month Lows on Treasury Buyback Plans: ETF Strategies to Play

The U.S. dollar fell to a three-month low against the euro on Aug. 21, 2026 as concerns grew that the U.S. Treasury’s plan to expand buybacks of longer-dated government debt could put additional pressure on the greenback.

Treasury Secretary Scott Bessent said on Aug. 20, 2026 that the government could further increase its Treasury repurchases, a day after the department surprised markets by pledging to at least double the size of its buybacks of longer-dated debt. The move is aimed at containing rising bond yields.

Note that U.S. dollar fund Invesco DB US Dollar Index Bullish Fund UUP has slumped about 1.9% over the past one month (as of Aug. 21, 2026). UUP offers direct exposure to the U.S. dollar and charges 70 bps in fees. It has an asset base of $320.8 million.

Long-Term Yields Continue to Climb

Despite the Treasury’s efforts, long-term yields have continued to rise. The 30-year Treasury yield reached its highest level since 2007 last week as investors focused on the deteriorating U.S. fiscal outlook, heavy government debt issuance, geopolitical risks linked to the war with Iran and uncertainty surrounding the Federal Reserve’s policy path, per Reuters, as quoted on Yahoo Finance.

Analysts argue that efforts to keep yields contained could simply shift fiscal concerns toward the U.S. currency, as mentioned in the same Reuters article. So far, the strategy has also failed to achieve its main objective, with yields moving higher despite the expanded buyback plans.

U.S. Dollar to Slip Further Ahead?

The next major test for Treasury yields could come next Friday, when Federal Reserve Chair Kevin Warsh speaks at the central bank’s Jackson Hole symposium.

Warsh unsettled markets following the Fed’s July meeting by offering limited guidance on how policymakers might respond to persistent inflationary pressures. TD Securities analysts said USD risks are “modestly to the downside” heading into the speech, per the above-mentioned source.

A more hawkish message focused on restoring inflation credibility could provide only limited support for the U.S. dollar, while any dovish tone resulting from cooling July inflation and softer labor market could put greater pressure on the currency.

Other Factors Playing Against Dollar Strength

BRICS economies have been taking an important step toward de-dollarization. The greenback’s share in global reserves has declined lately.

ETF Strategies to Play

Below we highlight a few winning exchange-traded fund (ETF) strategies that can be played amid a losing dollar environment.

Tap Inverse Dollar ETF

Needless to say, if the dollar is falling, a short position on the currency would result in positive returns. Invesco DB US Dollar Index Bearish Fund UDN should thus be tapped. The fund charges 68 bps in fees and has added over 2.5% over the past month.

The underlying index of the fund — the Deutsche Bank Short USD Currency Portfolio Index - Excess Return — is a rules-based index composed solely of short U.S. Dollar Index futures contracts that trade on the ICE futures exchange.

Focus on Real Assets

The decline in the U.S. dollar is good for raw materials and commodities, as these are priced in the U.S. dollar. SPDR Gold Shares GLD has gained about 11.7% over the past month. The broader commodities ETF, Invesco DB Commodity Index Tracking Fund DBC, has also risen about 4.7% over the past month (as of Aug. 21, 2026).

Opportunities in Emerging Markets

De-dollarization can create opportunities for investors in emerging markets, as countries that were previously reliant on the U.S. dollar may develop stronger local currencies and financial systems. This could lead to increased investment in these countries. Vanguard Emerging Markets Stock Index Fund ETF VWO has added about 2.8% over the past month.

Time for Large Caps?

Since large-cap stocks have greater foreign exposure, the weakening dollar is positive for this capitalization. SPDR S&P 500 ETF Trust SPY should thus be closely watched for gains. SPY has advanced about 2.5% over the past month.

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This article originally published on Zacks Investment Research (zacks.com).

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