The U.S. dollar held roughly flat on Tuesday as traders weighed Washington's expanded Iran sanctions against a Treasury plan to buy back longer-dated bonds. The Canadian dollar rebounded from Monday's tariff-driven slide, while Fed rate-hike odds for September kept dwindling.
Dollar Steadies After Bessent's Buyback Plan
The dollar index, which tracks the greenback against a basket of currencies, edged down 0.01% to 98.95. The euro was up 0.07% at $1.167. The dollar had stumbled late last week after Treasury Secretary Scott Bessent said the Treasury would double the size of quarterly repurchases of longer-dated bonds, stoking concern that a more direct approach to easing borrowing costs could debase the dollar.
A CNBC report on Monday that the Treasury could tap part of its cash balance to buy back longer-dated bonds, together with falling crude oil prices, helped send yields lower Monday. Expectations for a Fed rate hike at the September meeting have also dwindled, with markets pricing a 38.1% chance of at least a 25 basis point increase, down from about 55% a month ago, according to CME FedWatch.
Iran Sanctions Stop Short of Major Trade Partners
Washington unveiled expanded sanctions against Iran on Monday, which Tehran vowed to resist. The move was seen as short on details, as it made no mention of major trade partners such as China. Bessent, despite holding off on the harshest penalties, warned countries to cut business ties with Tehran or risk being forced out of the dollar-based financial system.
Canadian Dollar Rebounds as Tariff Fight Escalates
The Canadian dollar strengthened 0.08% versus the greenback to C$1.383 per dollar after posting its largest drop since June 17 on Monday, when U.S.-Canada trade talks collapsed and Washington slapped 50% levies on some items. President Donald Trump then said the U.S. would raise tariffs to 50% on all cars, trucks, automotive parts and steel from Canada starting January 1, 2027. Canada's trade minister, Dominic LeBlanc, said Tuesday he expected his government to announce retaliatory tariffs the same day.
Analysts at Goldman Sachs said the escalation drove Canadian dollar underperformance to start the week, but the move was relatively muted: "likely signaling some continued expectation for an ultimate resolution." The bank also pointed to adjustments Canadian businesses have made to their supply chains over the past year.
Yen Slips, Sterling Firms, Bitcoin Pulls Back
The yen weakened 0.09% against the greenback to 159.23 per dollar. Sterling strengthened 0.07% to $1.364.
Broader dollar weakness has been a boon to crypto markets recently: bitcoin was last off 0.27% to $78,713.40 after climbing to a more than three-month high of $81,237.94.
Later this week, traders will watch Federal Reserve Chairman Kevin Warsh's Jackson Hole speech on Friday for clues on the interest rate path, though several economists doubt he will offer any policy outlook.
Source: Investing.com
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