The US dollar struggled to sustain gains against major currencies on Tuesday as investors assessed Washington’s expanded sanctions against Iran and renewed efforts by the US Treasury to ease pressure on longer-dated government bond yields.
The euro edged up to US$1.1668, hovering near a three-month high reached last week, while sterling gained 0.1% to US$1.3639, close to a six-month peak.
The dollar index, which measures the greenback against six major currencies, slipped marginally to 98.96 in Asian trade after rising 0.16% overnight and moving away from three-month lows.
US Treasury Secretary Scott Bessent unveiled expanded sanctions against Iran on Monday, warning countries to cut business ties with Tehran or risk being excluded from the US dollar-based financial system.
Ray Attrill, head of FX strategy at National Australia Bank, said the threat could provide some support for the dollar as countries potentially seek to secure access to US dollars before sanctions take effect.
The Canadian dollar was flat at C$1.3844 per US dollar after falling 0.6% in the previous session as Washington threatened higher tariffs on Canadian goods following the collapse of trade negotiations.
The Japanese yen strengthened slightly to 159.21 per US dollar, while the Australian dollar and New Zealand dollar each gained 0.1% to US$0.7157 and US$0.5965 respectively.
Meanwhile, US Treasury yields found some support following reports that the Treasury could use part of its cash balance to buy back longer-dated bonds to help ease borrowing costs.
The move comes after Bessent last week announced plans to double the size of quarterly repurchases of longer-dated bonds after yields climbed to their highest levels in nearly two decades.
However, the relief was limited, with the yield on the two-year Treasury note holding at 4.246% while the benchmark 10-year yield stood at 4.704%.
Investors are also awaiting Federal Reserve Chair Kevin Warsh’s first speech at Jackson Hole, Wyoming, on Friday for clues on the central bank’s response to rising bond yields and its policy independence from the Trump administration.
OCBC FX strategist Sim Moh Siong said uncertainty over the Fed’s policy reaction function and doubts over its commitment to prioritising inflation were limiting the scope for further US dollar gains.
Bitcoin, meanwhile, rose 1% to US$78,817.34 after recording its largest weekly gain in nearly three-and-a-half years last week.
