The US dollar index extended its rebound during Tuesday's Asian trading session, hovering near the 99.00 mark for a second consecutive day of gains. The primary support for the greenback comes from safe-haven inflows and a market repricing of global geopolitical risks.
Following the US expansion of secondary sanctions targeting entities doing business with Iran, concerns over energy supply, global inflation, and financial market volatility have intensified, prompting some buying interest in the dollar as a traditional safe-haven asset. US Treasury Secretary Bessent stated that Washington will further broaden sanctions against Iran's economic network and warned that institutions conducting related business with Iran may face US sanction risks. Additionally, the US is expected to take further action against a major financial institution this week. The extension of sanctions from Iran itself to third-party financial and commercial institutions has refocused market attention on potential ripple effects across energy supply and the global financial system.
From a short-term perspective, geopolitical risks provide relatively direct support for the dollar. Should any new disruption emerge in energy transport or crude supply, oil prices could rise further, fueling global inflation expectations. For the US, higher oil prices would increase costs for households and businesses and slow the pace of disinflation, meaning market expectations for a potential Fed policy re-tightening have not entirely faded.
However, this dollar rebound still faces constraints from the US bond market. The Treasury Department recently announced an expansion of its long-dated bond buyback operations, aiming to improve liquidity in the long-end of the curve. Markets are also watching whether the Treasury will further utilize its General Account (TGA) funds to support these operations. While buybacks may improve bond market liquidity in the short term, if persistently elevated long-term yields are fundamentally driven by fiscal deficits, debt levels, and term premia, merely expanding buyback size cannot fully alleviate concerns about US fiscal health.
The dollar currently faces a key contradiction: geopolitical risks drive safe-haven demand, yet US fiscal pressures limit the greenback's appeal as a long-term store of value. This suggests the dollar can rebound on safe-haven inflows in the near term, but without further support from US economic data and rate expectations, any upside may lean toward technical correction rather than a new medium-term trend.
US economic data will serve as an important catalyst for the dollar this week. Tuesday brings consumer confidence figures, while Wednesday features the Personal Consumption Expenditures (PCE) price index. As the Fed's preferred inflation gauge, PCE will directly influence market judgments on future rate policy. If inflation data exceeds expectations, Treasury yields could push higher, providing fresh rate support for the dollar; conversely, if inflation continues to cool, expectations for Fed policy easing could regain traction, limiting the dollar's rebound.
Meanwhile, markets await remarks from Federal Reserve Chairman Kevin Warsh at the Jackson Hole Economic Policy Symposium. With US inflation still showing some stickiness and energy price gains adding uncertainty to the inflation outlook, investors are looking to Warsh's speech for more clues on rate policy and inflation targets.
This week's dollar narrative has shifted from pure safe-haven trading to a comprehensive interplay of "inflation data + Fed policy + US fiscal conditions." If PCE surprises to the upside and Warsh delivers hawkish signals, the dollar's rebound could expand further; conversely, if inflation readings are benign and the Fed emphasizes growth risks, the dollar index may come under renewed pressure.
From a global market perspective, the dollar index remains a crucial hub linking FX, gold, crude oil, and US Treasuries. A stronger dollar typically raises the holding cost of dollar-denominated commodities and may put short-term pressure on gold; however, if dollar strength coincides with sharply higher oil prices, markets could enter a complex environment of "dollar safe haven + energy inflation." In such a scenario, changes in Treasury yields and real rates will matter more than the dollar's nominal moves.
Market sentiment remains cautious. Some investors have begun trimming dollar short positions following the currency's recent sustained weakness, and such positioning adjustments alone can drive short-term rebounds. Market strategists note that ahead of a dense calendar of macro data and policy events, investors tend to reduce directional risk exposure, so the dollar may attract some defensive buying — but this does not imply a fundamental shift in its medium-term weakness.
On the daily technical chart, the dollar index is currently trading around 99.00. Despite two consecutive days of gains, the broader picture remains weak. The index sits below both short- and medium-term exponential moving averages, with the 14-day RSI near 35, approaching oversold territory. This indicates bearish momentum still dominates, though the scope for further downside in the near term has narrowed. The 99.22 level is the first resistance; a decisive break above it would open the door toward the 99.98 medium-term moving average pressure. Only a firm reclaim of the 100 handle would meaningfully improve the dollar's short-term structure.
On the 4-hour timeframe, the dollar index has staged a technical rebound after prolonged declines, with short-term momentum showing some repair, but this remains a pullback within a weak structure. If 99.22 is convincingly breached, the dollar could extend toward the 99.60–100.00 zone; if it fails to advance and breaks back below 98.80, the rebound structure could be undermined, prompting a retest of the 98.50 area. The MACD's short-term momentum needs to be monitored for sustained upside expansion, while an RSI recovery from lows would support further dollar repair; however, if momentum fades rapidly during the rebound, caution is warranted for a renewed dollar weakening.
In summary, the dollar index is in a typical phase of "short-term rebound, medium-term weakness." Geopolitical risks and safe-haven demand are pushing the greenback back toward the 99 level, but US fiscal pressures, long-term bond yields, and market repricing of future Fed policy remain significant constraints. Over the coming sessions, the PCE inflation data and Warsh's remarks at the Jackson Hole symposium will determine whether the dollar's rebound transforms from technical correction into trend-following strength. If US inflation re-accelerates and drives yields higher, the dollar could challenge 99.98 and even the 100 mark; if PCE comes in below expectations and Fed policy expectations tilt back toward easing, the dollar could slide back below 98.80.
From an asset allocation standpoint, current dollar moves will also directly impact gold and oil. A break above 100 would likely pressure precious metals in the near term; conversely, renewed dollar weakness would offer stronger support for gold. Therefore, 99.22 is the first key level for assessing the strength of the dollar's short-term rebound, while the 100 handle serves as the critical confirmation zone for determining whether the dollar's trend has truly shifted.