Dollar Firms as Treasury Yields Recover, Iran Sanctions Loom

The US Dollar has firmed up slightly after the US Treasury expanded long-end bond buybacks. According to DBS Group Research economist Chang Wei Liang, this move only has a small and temporary impact on markets without any meaningful change to the US fiscal trajectory.

Liang notes that DXY is consolidating around 99.00 following the announcement of the expanded buyback program. The USD's firmness also tracks a modest recovery in long-end US Treasury yields, which have been rising.

However, Liang warns that an expected tightening of US sanctions on Iran could pose unintended consequences, including risks of bolstering inflation expectations and lifting both US yields and the Dollar. This move is expected to be announced on Monday.