The U.S. dollar faces further downside as investors question whether Treasury efforts to suppress long-term yields and the Federal Reserve's response could weaken confidence in American policy, BofA Securities said. The Treasury plans to at least double the maximum size of long-dated bond buybacks to $4 billion per operation from $2 billion between September 9 and November 4. BofA said the timing, outside the regular quarterly refunding process, suggested the move was aimed mainly at containing long-term borrowing costs rather than improving market liquidity. Without corresponding fiscal restraint, suppressing yields could make the exchange rate the main adjustment mechanism, putting pressure on the dollar. The greenback weakened after the announcement, while gold and the Swiss franc outperformed, and U.S. equities declined despite lower 10-year Treasury yields. BofA said the Federal Reserve's response will be critical: accommodative financial conditions, especially if the central bank absorbs increased Treasury bill issuance through its balance sheet, could support selling the dollar against higher-beta currencies (currencies more sensitive to market risk). The bank said weakness in both funding and risk-sensitive currencies suggested structural dollar problems rather than a temporary reaction to lower interest rates. Demand for options protection against dollar declines has increased, particularly against the euro, Swiss franc and Swedish krona, although short- and longer-dated currency volatility remains historically inexpensive. BofA added to its dollar shorts by recommending a long position in NZD/USD at 0.5957, with a target of 0.62 and a stop at 0.58. It expects two additional rate increases from the Reserve Bank of New Zealand. Weather-related disruption to global food supplies could support New Zealand's export prices and currency, while a break above two resistance levels has improved NZD/USD's technical outlook. The main risk is an equity selloff that pressures higher-beta currencies.