Dollar Falls Amid Bond Market Rally Ahead of PCE Data

The U.S. dollar declined on Tuesday due to rising risk sentiment and falling oil prices, which pushed Treasury yields lower for a second consecutive day.

According to Thierry Wizman, global FX and rates strategist at Macquarie, some traders may have taken notice of reports that the U.S. Treasury Secretary might use the Treasury's General Account to increase long-term bond buybacks, potentially reducing the average outstanding maturities on marketable US government debt obligations.

The fixed-income space remained a key driver for currency markets, with U.S. Treasury yields extending their decline ahead of Wednesday's data on the July core personal consumption expenditures price index and next week's Jackson Hole conference.

In other major currencies, the Canadian dollar strengthened against the U.S. dollar after Canada announced retaliatory tariffs in response to new 50% U.S. tariffs on $27.6 billion of Canadian imports.