Dollar Hovers Near Multi-Month Lows as Treasury Buybacks Rattle Markets

The U.S. dollar remained under pressure near multi-month lows on Monday as investors weighed the Treasury Department’s decision to increase long-term bond buybacks, while awaiting fresh U.S. sanctions on Iran and key central bank speeches.

The Canadian dollar weakened 0.2% to C$1.3798 per U.S. dollar after U.S.-Canada trade negotiations collapsed. Washington imposed 50% tariffs on a range of Canadian goods, prompting Ottawa to announce matching retaliatory measures.

Elsewhere, the Australian and New Zealand dollars stayed close to three-month highs at $0.7171 and $0.5979, respectively. The euro traded firmly at $1.1685, sterling held at $1.3650, and the Japanese yen remained stronger than 159 per dollar.

The Chinese yuan hovered around 6.7222 per dollar, near a three-and-a-half-year high after recording its eighth consecutive weekly gain.

Dollar selling was tempered by Friday’s U.S. data showing services activity expanded at its fastest pace in nearly two years in August. However, concerns about U.S. currency weakness intensified after the dollar posted its steepest weekly decline against Bitcoin in nearly three-and-a-half years and continued losing ground against gold.

Global long-term bond yields have climbed amid resilient economic growth, rising inflation expectations and concerns over mounting government debt. After U.S. 30-year Treasury yields approached two-decade highs last week, the Treasury said it would double long-end bond buybacks to $4 billion per operation.

Although small compared with the roughly $32 trillion Treasury market, the move unsettled currency traders amid concerns that policymakers are attempting to restrain long-term yields.

Attention now turns to Treasury Secretary Scott Bessent’s Monday press conference, where he is expected to unveil what he has described as the toughest U.S. sanctions yet against Iran.

Federal Reserve Chairman Kevin Warsh’s Jackson Hole speech on Friday will also be closely watched for signals on interest rates, the Fed balance sheet and Treasury yields. Meanwhile, Bank of Japan Deputy Governor Ryozo Himino speaks Thursday, with investors looking for clues on whether the BOJ is moving toward another rate hike.