Dollar Holds Firm on Hawkish Fed View

The dollar index held steady near 99 on Wednesday as investors awaited the latest US PCE price index report, the Federal Reserve’s preferred measure of inflation. The data comes ahead of Fed Chair Kevin Warsh’s speech at the annual Jackson Hole symposium on Friday, where he is not expected to provide clear guidance on the central bank’s policy decision in September. Meanwhile, the dollar remained near its lowest level in more than three months as investors continued to assess the implications of the Treasury Department’s expanded debt buyback program. Markets are concerned that the plan could provide only a temporary solution while reviving worries about the risks of a US debt crisis and further dollar weakness. Elsewhere, oil prices fell for a third straight session, easing inflation concerns and reducing safe-haven demand for the greenback.

The dollar index steadied near 99 on Tuesday after gaining some ground in the previous session, supported by safe-haven demand as the US moved to cut Iran off from the global financial system, highlighting the greenback’s central role in international trade. Treasury Secretary Scott Bessent announced plans on Monday to isolate Iran through sanctions targeting countries doing business with the Islamic Republic. Still, the dollar remained near three-month lows as the Treasury Department announced an expansion of its buyback program for long-dated government debt in an effort to contain rising borrowing costs. However, markets speculated that the plan may offer only a temporary solution, while renewing concerns over the risks of a US debt crisis and dollar weakness. Elsewhere, investors looked ahead to the latest US PCE price index data and Fed Chair Kevin Warsh’s speech at the annual Jackson Hole symposium this week for fresh clues on the monetary policy outlook.

The dollar index edged up to 99.0 on Monday but remained near three-month lows after its third weekly decline in four. The greenback stayed under pressure following the US Treasury’s decision to double buyback operations for longer-dated bonds, with reports suggesting Secretary Scott Bessent could use nearly $1 trillion from the Treasury’s General Account to help fund them. Meanwhile, trade tensions with Canada intensified after Washington imposed 50% tariffs on Canadian goods, with Ottawa pledging dollar-for-dollar retaliation. President Donald Trump also said tariffs on cars, trucks, auto parts and steel would rise to 50% from January 1, 2027. On the geopolitical front, the US expanded secondary sanctions targeting entities and countries maintaining business ties with Iran. Bessent warned that a major financial institution could be sanctioned this week and suggested China would not be exempt.