# China Defends Iran Ties Against New US Sanctions as US Dollar Rebounds Near 99.00

> Beijing has affirmed its lawful trade with Iran despite fresh US economic sanctions, while the US Dollar rebounds and global financial markets react to bond interventions and monetary policy expectations.

**Type:** article · **Category:** Market · **Published:** 2026-08-25 · **Source:** TrendKia
**Canonical:** https://trendkia.com/en/market/china-defends-iran-ties-against-new-us-sanctions-as-us-dollar-rebounds-near-99-00-21707 · **Language:** English
**Tags:** US Dollar, Iran Sanctions, China Foreign Ministry, Forex Market, Gold Price, Bitcoin, Federal Reserve

Tensions between major global economies have spilled over into international financial markets following new restrictive measures announced by the United States against Iranian economic targets. Official statements from Beijing affirming its commitment to trade with Tehran coincided with a recovery in the US Dollar Index, creating a ripple effect across foreign exchange, commodities, and digital asset markets.

## Beijing Rejects US Sanctions on Iran
The US government rolled out fresh economic sanctions targeting 60 individuals, corporate entities, and vessels linked to Iran. Washington indicated that the enforcement package aims to restrict financial flows to the Iranian economy, though the measures stop short of the maximum possible economic restrictions. The move highlights continued geopolitical friction in the Middle East.

In response to the announcement, Chinese Foreign Ministry spokesperson Lin Jian stated that commercial cooperation between China and Iran is conducted in full accordance with international law. Speaking at a press briefing, the spokesperson stressed that bilateral relations should be respected and not subjected to external interference, adding that Beijing remains committed to taking necessary actions to protect its sovereign trade interests.

## US Dollar Dynamics and Federal Reserve Mandate
Following the diplomatic exchange, the US Dollar Index (DXY) staged a recovery toward the 99.00 level after an earlier corrective slide. The US Dollar remains the central currency of international commerce, involved in over 88% of all foreign exchange transactions worldwide, representing roughly $6.6 trillion in daily turnover according to established benchmark data.

The fundamental valuation of the US Dollar is driven primarily by monetary policy set by the Federal Reserve. Operating under a dual mandate of price stability and maximum employment, the central bank adjusts interest rates to manage economic conditions. When inflation accelerates past the Fed's 2% annual target, higher policy rates tend to appreciate the greenback, whereas rate reductions during economic slowdowns generally weaken the currency.

## Understanding QE and Quantitative Tightening
To navigate severe credit dislocations, the Federal Reserve relies on balance sheet adjustments alongside traditional rate tools. Quantitative Easing (QE) involves creating new reserves to purchase government securities from financial institutions, a measure famously deployed during the 2008 financial crisis to inject liquidity when interbank lending stalled. QE typically exerts downward pressure on the dollar's value.

Conversely, Quantitative Tightening (QT) reduces the central bank's balance sheet by halting reinvestments in maturing Treasuries. By draining excess liquidity from the banking system, QT generally provides structural support to the US Dollar over time.

## Market Reactions Across Forex, Commodities, and Crypto
Currency markets reflected the firmer dollar tone across major pairings. GBP/USD traded in a tight consolidation range below 1.3650 for a second consecutive session, constrained by the recovering dollar. Meanwhile, EUR/USD struggled around 1.1650 as rising energy costs and elevated bond yields dampened risk appetite across European trading floors.

In commodities, Gold prices pulled back below $4,650 after briefly testing levels near $4,700, its highest peak since mid-May. Ongoing inflation concerns driven by volatile energy markets have maintained expectations for potential interest rate adjustments by the Federal Reserve, weighing on unyielding assets. In contrast, risk sentiment buoyed digital assets, with Bitcoin holding gains above $80,000 while altcoins like Aerodrome Finance (AERO) and Virtuals Protocol (VIRTUAL) posted strong intraday advances.

## US Treasury Expands Liquidity Buybacks
Adding another layer to market dynamics, the US Treasury Department announced an uncharacteristic shift in its scheduled operations. The department revealed plans to significantly expand its liquidity support buyback operations targeting 10-year to 30-year maturity sectors.

Beginning September 9 and running through November 4, the maximum buyback limit per operation will increase from $2 billion to at least $4 billion. This intervention aims to cushion the long-dated treasury market against high yields and preserve orderly trading conditions in government debt instruments.

## What this means for you
**In India:** Firming oil prices and a stronger US Dollar could exert pressure on the Indian Rupee, potentially increasing import costs for key commodities.

**For Global Investors:** Adjustments in US Treasury liquidity operations and Fed rate expectations may drive continued volatility across forex, precious metals, and crypto assets.

## Questions & Answers

### 1. What was China's response to the new US sanctions on Iran?
China stated that its economic ties with Iran comply with international law and warned that third parties should not interfere with or disrupt this cooperation.

### 2. What action did the US take against Iran?
The US announced economic sanctions targeting 60 individuals, entities, and vessels in an effort to restrict Iran's financial lifelines.

### 3. Where did the US Dollar Index (DXY) trade following these announcements?
The US Dollar Index recovered to near 99.00 following an intraday corrective move and China's public statements.

### 4. What operational change did the US Treasury announce for long-dated bonds?
The US Treasury announced it will double its liquidity support buyback operations for 10-year to 30-year sectors from $2 billion to at least $4 billion per operation between September 9 and November 4.

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