US Dollar Gains on Safe-Haven Demand as Iran Sanctions Expand
The US Dollar strengthens due to heightened safe-haven demand, following the expansion of secondary sanctions by the US aimed at Iranian trade networks and Chinese institutions. The upside for the greenback continues to be limited as the Treasury implements a strategy of doubling long-dated bond buybacks, utilising up to $1 trillion. Traders are anticipating the release of significant US PCE inflation data, alongside Fed Chair Warsh’s forthcoming address at Jackson Hole. The US Dollar Index, which compares the value of the US dollar to six major currencies, is trading at about 99.00 on Tuesday during Asian hours, continuing its advances for the second day in a row. The Greenback gains safe-haven support amid escalating geopolitical tensions. This upside follows the expansion of secondary sanctions in the United States against entities engaged in trade with Iran.
US Treasury Secretary Scott Bessent cautioned that a significant financial institution may encounter enforcement action this week, explicitly stating that Chinese entities will not be shielded from these measures. Despite these geopolitical tailwinds, further gains for the Greenback may be constrained by the US Treasury’s decision to double its buyback operations for longer-dated bonds. Reports suggest that Secretary Bessent may draw upon as much as $1 trillion from the Treasury General Account to facilitate these repurchases, which could have implications for market liquidity and yields. Market participants are shifting their attention to a packed calendar of U.S. economic data releases this week. Key indicators on the horizon include Tuesday’s consumer confidence report and Wednesday’s Personal Consumption Expenditures price index, which serves as a crucial inflation metric for central bank policy.
The week will culminate on Friday when Federal Reserve Chair Kevin Warsh delivers his address at the annual Jackson Hole symposium. Investors expect that his speech will offer essential insights into the Fed’s monetary policy outlook and the short-term path of the US Dollar. Strategists at Scotiabank highlight that the “calendar and event risk this week is significant,” noting that a busy slate of data and policy signals is encouraging investors to reassess exposures. In their view, the “potential for some moderate gains in the USD broadly in the short run is high as investors pare back positioning,” with the Dollar seen benefiting from precautionary position trimming rather than a wholesale shift in the underlying trend.
In the daily chart, the Dollar Index Spot is trading at 99.00, exhibiting a bearish near-term sentiment as it remains below both the short-term and medium-term Exponential Moving Averages. The 14-day Relative Strength Index at 35 hovers just above oversold territory, indicating that downside momentum remains prevalent, although selling pressure has not reached extreme levels yet. On the topside, immediate resistance is observed at the nine-period EMA near 99.22, while the 50-period EMA around 99.98 establishes a higher cap that must be reclaimed to alleviate the prevailing downside bias. In the absence of evident structural supports beneath the current level in this dataset, the index is poised for potential further decline as it continues to operate below these moving average thresholds.
