Dollar trades near multi-month lows, restrained by debt nerves

The US dollar experienced a decline to near multi-month lows on Monday, as the US Treasury announced plans to double long-end buybacks to $4 billion per operation, following a surge in 30-year yields to two-decade highs. The Canadian dollar dropped 0.2% to C$1.3798 per dollar, following the collapse of trade talks with the US and the imposition of 50% tariffs on Canadian goods, which were met with Canadian retaliation.

The Australian and New Zealand dollars traded near three-month highs, while the euro was above $1.16, and the yen remained strong at 159 per dollar. Friday's data showed the strongest US services growth in nearly two years in August, helping to stabilize the dollar. The dollar's weekly drop against bitcoin in nearly three-and-a-half years was the largest since September 2020.

The US Treasury's interventionist signal to buy long bonds has sparked the $US debasement trade, with Australian financial services firm AMP's head of investment strategy, Shane Oliver, noting that the move could reignite concerns about US currency debasement. On Monday, US Treasury Secretary Scott Bessent was scheduled to hold a press conference to discuss the toughest sanctions ever imposed on Iran, while Federal Reserve Chairman Kevin Warsh was set to speak in Jackson Hole, Wyoming, on Friday, providing insight into the outlook for US interest rates.

The Bank of Japan's deputy governor, Ryozo Himino, was also set to appear on Thursday, ahead of the central bank's policy meeting, which could influence the direction of the yen.