The Dollar Is Struggling Even With Geopolitical Risk — Treasury Buybacks Changed the Trade

The U.S. dollar struggled to hold gains on Tuesday even as investors digested fresh sanctions on Iran and renewed geopolitical uncertainty. In a conventional risk-off episode, the dollar often benefits from safe-haven demand.

The difference is the bond market. The U.S. Treasury recently doubled long-dated debt buybacks to $4 billion per operation in an effort to improve liquidity after yields surged. The announcement pushed long yields lower and weakened the dollar, while gold and cryptocurrencies rallied.

The move arrived as U.S. federal debt crossed $40 trillion, intensifying debate over fiscal sustainability. Buybacks can improve market functioning, but they do not eliminate the underlying borrowing requirement.

Iran sanctions add another layer. They can support the dollar through risk aversion, but they can also keep oil and inflation elevated.

Positive case: geopolitical stress escalates, U.S. growth remains stronger than peers and Treasury yields rise in an orderly way.

Downside case: buybacks keep suppressing long yields while fiscal concerns remain unresolved.

What would change the story: watch the relationship between the dollar and long-term Treasury yields.

PriceVia View: if yields fall and the dollar weakens together, the market is trading liquidity and fiscal credibility rather than simple risk aversion.

Market-risk disclaimer: This article is for informational and educational purposes only and does not constitute investment advice.