The U.S. dollar hovered near multi‑month lows on Monday, reflecting a market unsettled by several high‑profile policy moves. Traders cited the Treasury Department’s announcement to double its long‑term bond buybacks, pending sanctions on Iran, and upcoming speeches by key policymakers in the United States and Japan as key factors.
Bond‑Buyback Announcement Sparks Nerves
Last week, after 30‑year Treasury yields rose to near two‑decade highs, the Treasury said it would increase its long‑end buyback operations to $4 billion per transaction. While the overall market size is roughly $32 trillion, the move signaled an interventionist stance that spooked investors and weighed on the dollar.
“The Treasury’s attempts to artificially hold down long‑term yields appear to be reigniting the dollar debasement trade,” said Shane Oliver, head of investment strategy at Australian financial services firm AMP. The sentiment helped keep the Australian dollar above 71 cents to the U.S. dollar.
Currency Movements Across the Globe
In early trade, the Canadian dollar fell 0.2 percent to C$1.3798 per U.S. dollar after trade talks with the United States collapsed and Washington imposed 50 percent tariffs on Canadian goods, prompting a reciprocal response from Canada.
The Australian and New Zealand dollars traded just shy of three‑month highs at $0.7171 and $0.5979, respectively. The euro remained comfortably above $1.16 at $1.1685, while the Japanese yen held near the strong side of 159 per dollar.
Britain’s pound stayed firm at $1.3650, and China’s yuan, after an eighth straight weekly rise, hovered near a 3½‑year high at 6.7222 per dollar.
Sanctions on Iran and Market Outlook
At 1800 GMT on Monday, U.S. Treasury Secretary Scott Bessent is scheduled to hold a press conference, following remarks about imposing “the toughest sanctions in history” on Iran. Markets are watching to see whether the sanctions will also target China.
Iran’s foreign minister dismissed the threat as a sign of desperation, adding further uncertainty to the geopolitical backdrop.
Upcoming Policy Speeches
Investors also await clarity on U.S. interest‑rate outlook when Federal Reserve Chairman Kevin Warsh speaks at the Jackson Hole symposium in Wyoming on Friday. Warsh is expected to face questions about the Treasury’s bond‑buyback program.
“Any comments on the balance sheet, duration supply, or term premium could move the long end more than the data itself. That said, given Warsh’s typically restrained style, we aren’t holding our breath,” said BNY strategist Geoff Yu.
Later in the week, Bank of Japan deputy governor Ryozo Himino will appear before lawmakers, offering clues ahead of the BOJ’s next policy meeting. Analysts expect his remarks could hint at a possible rate hike, though any hawkish tone is likely to have only modest impact on USD/JPY compared with developments in the U.S. bond market.
Broader Market Context
Friday’s data showing the strongest U.S. services growth in nearly two years helped steady early trade, while the dollar posted its largest weekly drop against bitcoin in nearly three‑and‑a‑half years on Sunday. Gold prices have also risen sharply as investors fear the dollar could weaken further if the U.S. tries to keep yields low.
Long‑end yields worldwide have been climbing on a mix of solid economic growth expectations, rising inflation forecasts, and concerns over expanding sovereign debt levels.
Overall, the combination of Treasury intervention, looming sanctions, and upcoming policy speeches continues to create volatility in foreign‑exchange markets, keeping the dollar under pressure as investors weigh the potential impact on the broader economy.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
