# US Dollar Faces Downside Bias Amid Policy Risks and Iran Sanctions

> The US Dollar starts the week on a soft note as markets await critical policy signals from the White House, renewed trade tensions, and sanctions on Iran.

**Type:** article · **Category:** Market · **Published:** 2026-08-24 · **Source:** TrendKia
**Canonical:** https://trendkia.com/en/market/us-dollar-faces-downside-bias-amid-policy-risks-and-iran-sanctions-21305 · **Language:** English
**Tags:** US Dollar, Forex Market, Gold Price, Iran Sanctions, US Treasury, PCE Data, DXY Index

The US Dollar commenced the week on a soft footing as financial markets eagerly awaited fresh policy signals from the White House. Market experts point out that emerging sanctions on Iran, renewed trade frictions between the US and Canada, and potential fiscal consolidation are currently taking center stage, alongside upcoming US core PCE data and Kevin Warsh's speech at Jackson Hole. Analysts see clear scope for further dollar long-squeezing and DXY consolidation within a well-defined range.

 

## Geopolitical Tensions and Trade Dynamics
 Market watchers noted last week a preference for a more pro-risk and benign dollar decline compared to peers who anticipate sharper losses driven by a return of the debasement trade. This theory faces a real-world test with US Treasury Secretary Scott Bessent rolling out a fresh round of sanctions against Iran. With a brand-new chapter in the US-Canada trade war unfolding over the weekend, questions naturally arise regarding how strictly these Iranian sanctions might strain Washington's commercial ties with Beijing, given that China remains the top importer of Iranian energy.

 Given the highly febrile mood across global trading desks and existing market positioning, any substantial re-escalation in the ongoing tariff disputes will likely weigh heavily on the greenback. Consequently, the DXY dollar index is projected to see continued consolidation within the 98.50 to 99.00 range, with the balance of risk skewed firmly to the downside.

 

## Major Currency Pairs and Precious Metals
 The GBP/USD pair held its ground above the 1.3600 handle on Monday following an impressive rally the previous week, entering a consolidation phase. The US Dollar managed a tepid recovery as market uncertainty lingered over the potential impact of economic sanctions against Iran on global energy prices, leaving risk-sensitive currency pairs on the back foot. Similarly, EUR/USD struggled below 1.1700 after posting substantial gains the prior week. The single currency faced headwinds as the dollar attempted a modest rebound from a heavy sell-off triggered earlier by the US Treasury's adjustments to its bond buyback strategy. Investors continue to maintain a cautious stance while awaiting key data releases and definitive details on the sweeping Iran sanctions package.

 Meanwhile, Gold (XAU/USD) extended its bullish momentum on Monday, building directly on last week's stellar rally that followed the Treasury's buyback announcement, to trade near $4,650, marking its strongest level since May.

 

## The US Treasury Buyback Shift
 The catalyst behind much of last week's structural shift occurred on Wednesday when the US Treasury deviated from its standard calendar. At 12:32 GMT, the department officially announced it would double the size of its liquidity support buyback operations spanning the 10-year to 20-year and 20-year to 30-year maturity sectors. This move effectively lifted the maximum cap from $2 billion per operation to at least $4 billion, taking effect from September 9 through November 4.

## What this means for you
**Global Markets Impact:** Softer US Dollar momentum and heightened geopolitical tensions are driving safe-haven demand, supporting gold prices near multi-month highs and influencing short-term forex trading strategies.

## Questions & Answers

### 1. How is the US Dollar performing at the start of the week?
The US Dollar has started the week on a soft note, with the DXY index expected to consolidate within a defined range of 98.50 to 99.00.

### 2. At what level is Gold (XAU/USD) trading?
Gold is trading near $4,650, marking its highest level since May, building on strong momentum from the previous week.

### 3. What changes did the US Treasury make to its buyback operations?
The US Treasury doubled the maximum size of liquidity support buyback operations in the 10-year to 30-year sectors from $2 billion to at least $4 billion.

### 4. How could sanctions on Iran impact trade relations?
New sanctions on Iran threaten to strain US trade ties with China, which remains the largest buyer of Iranian energy imports.

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