The U.S. dollar showed little momentum on Tuesday, slipping after investors digested two major developments from Washington: an expansion of sanctions targeting Iran and a renewed Treasury effort to buy back longer‑dated bonds.
Sanctions on Iran add pressure
U.S. Treasury Secretary Scott Bessent announced on Monday that the United States will broaden sanctions against Iran, warning foreign firms that continued business with Tehran could be forced out of the dollar‑based financial system. The move was intended to curb Iran’s illicit activities and signal that non‑compliance may result in loss of access to U.S. dollars.
Ray Attrill, head of FX strategy at National Australia Bank, suggested the sanctions could provide a modest lift for the dollar, noting that entities facing restrictions might seek to purchase dollars before access is cut off.
Treasury bond buybacks aim to lower yields
In parallel, the Treasury signaled it could use part of its cash balance to repurchase longer‑dated Treasury securities, a step meant to ease borrowing costs. This follows Bessent’s surprise announcement last week that the Treasury would double the size of its quarterly repurchases after yields on long‑term debt rose to their highest levels in nearly two decades.
Despite the buyback plan, relief was limited. The yield on the two‑year note held steady at 4.246%, while the benchmark ten‑year note yielded 4.704%.
Currency market reactions
Against major peers, the dollar index edged down to 98.96 in Asian trading, after a brief rise that lifted it from three‑month lows. The euro traded near a three‑month high at $1.1668, and the British pound was up 0.1% at $1.3639, close to its six‑month peak.
The Canadian dollar steadied at $1.3844 after a recent dip, while the Japanese yen rose slightly to 159.21 per dollar, still far from its multi‑decade low of about 164. The New Zealand and Australian dollars each gained 0.1% ahead of the Reserve Bank of Australia’s policy meeting minutes release.
Investor focus on Fed outlook
Market participants also awaited Federal Reserve Chair Kevin Warsh’s debut speech at the Jackson Hole symposium in Wyoming, looking for clues on the Fed’s response to recent yield jumps and its independence from the previous administration. Sim Moh Siong, FX strategist at OCBC, warned that lingering uncertainty over the Fed’s policy direction could constrain further dollar gains.
In the cryptocurrency arena, Bitcoin rose 1% to $78,817.34 after posting its largest weekly gain in over three and a half years the week before.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
