The US dollar hovered near multi-month lows on Monday as markets remained unsettled by the US Treasury’s pledge to buy back more long-term bonds, while traders awaited details of new sanctions on Iran and monetary policy signals from the United States and Japan this week.
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The Canadian dollar fell 0.2% in early trading to C$1.3798 per US dollar after trade talks with the United States collapsed and Washington imposed 50% tariffs on Canadian goods, prompting a reciprocal response from Ottawa.
The Australian and New Zealand dollars traded near three-month highs at $0.7171 and $0.5979, respectively.
The euro comfortably held above $1.16 at $1.1685, while the yen remained firm at around 159 per dollar.
Data released on Friday showing that the US services sector expanded in August at its strongest pace in nearly two years helped curb dollar selling during early trading, which was otherwise relatively subdued.
On Sunday, the dollar recorded its biggest weekly decline against Bitcoin in nearly three and a half years. It also fell sharply against gold amid renewed concerns that the currency could come under pressure if the United States attempts to reduce yields.
Long-term bond yields have risen globally on a combination of stronger economic growth expectations, forecasts of higher inflation and concerns over rising sovereign debt.
After 30-year bond yields reached their highest level in nearly two decades last week, the US Treasury announced plans to double its buyback operations in long-term bonds to $4 billion per operation.
Although that amount is small compared with the $32 trillion market, the prospect of government intervention unsettled traders and weighed on the dollar.
Sterling was steady at $1.3650 in early trading, while the yuan hovered near a three-year high of 6.7222 per dollar after posting its eighth consecutive weekly gain last week.
Later on Monday, US Treasury Secretary Scott Bessent is due to hold a news conference after threatening to impose “the toughest sanctions in history” on Iran. Markets are focused on whether China will be among the targets.
Iran’s foreign minister described the threat of new US sanctions as a sign of desperation.
Traders are also looking for greater clarity on the outlook for US interest rates when Federal Reserve Chair Kevin Warsh speaks at the Jackson Hole symposium in Wyoming on Friday.
The remarks by Bank of Japan Deputy Governor Ryozo Himino on Thursday will also be closely watched as a potential indication of the central bank’s stance ahead of its monetary policy meeting next month.
Source: Reuters
