FOREX-Dollar edges higher as investors weigh Iran sanctions, Treasury buybacks

The U.S. dollar regained ‌some ​strength on Tuesday, as investors parsed Washington's expanded sanctions against Iran and renewed efforts to ease pressure on longer-dated Treasury yields, while cryptocurrencies extended a rally on debasement fears.

U.S. Treasury Secretary Scott Bessent unveiled an expansion of sanctions against Iran on Monday, warning countries to ‌cut business ties with Tehran or risk being forced out of the dollar-based financial system. "That potentially is one source of a slight reversal of the dollar weakness that we had at the end of last week," Ray Attrill, head of FX strategy at National Australia Bank, said in a podcast.

"The suggestion being that, maybe if you're going to be sanctioned and you're ‌not going to have access to U.S. dollars, then you better buy some dollars first before that happens." The euro was a touch softer at $1.1659, on track for a ‌second day of decline after hitting a three-month peak last week. The Swiss franc also weakened a touch to 0.8039 per dollar and was heading for its fourth straight day in the red, easing from the one-month high it hit in the week before.

As well as the overnight sanctions announcement, currency traders continue to process the trade dispute between the U.S. and Canada, as well as the state of play in the ⁠U.S. Treasury market. The ​former was weighing on the Canadian dollar, ⁠which weakened for a second day against its U.S. counterpart. The U.S. dollar was last up 0.1% at C$1.3860, having jumped 0.6% on Monday, its biggest daily gain in two months.

Also helping the U.S. dollar was ⁠greater stability in longer-dated Treasuries after CNBC reported that the U.S. Treasury could use part of its cash balance to buy back longer-dated bonds in an effort to ease borrowing costs. Bessent surprised global bond ​investors last week by saying the Treasury would double the size of quarterly repurchases of longer-dated bonds after their yields reached the highest levels in nearly two decades.

But ⁠the pressure remains on Treasuries, and bond markets around the world. "There's an awful lot of supply coming onto the market, not only in the U.S. to fund these deficits, but also pretty much across Europe," Michael Hewson, ⁠a ​senior market analyst at iForex, said.

"And now we've got all of these big corporates pumping in bonds as well, not to mention all the money that's going in potentially into these big IPOs. So all around it is exerting further upward pressure on yields." Elsewhere, the dollar climbed 0.1% on the Japanese yen to 159.34. The yen has been ⁠in something of a holding pattern in recent weeks, having given back some of its intervention gains, but is still well off a multi-decade low of about 164 it hit ⁠before Japanese authorities stepped into markets.

Sterling bucked the ⁠trend, cutting some early losses, and was a touch stronger at $1.3639. But worries about the broader dollar remained apparent in the cryptocurrency market.

Bitcoin briefly crossed the $80,000 mark for the first time since mid-May, taking its gains for the month to nearly 30%, while ether edged up ‌and was close to ‌its January high.