Dollar Rises Most in Two Weeks After Bessent Threatens to Cut Iran Off From Dollar System

The dollar posted its biggest gain in two weeks after US Treasury Secretary Scott Bessent said Washington would move to cut Iran off from the global financial system.

The Bloomberg Dollar Spot Index rose about 0.2% on Aug. 24, according to Bloomberg. The greenback strengthened against all 10 Group-of-10 currencies.

The advance reflected renewed haven demand after the US warned that countries doing business with Iran could also face sanctions. Bessent said the US would pursue unprecedented sanctions to isolate Iran from the international financial system. Countries that trade with Iran would also face US sanctions, he added.

Andrew Hazlitt, a foreign-exchange trader at Monex, said the US had delivered a clear message that it was prepared to block Iran and its allies from the dollar system. That has put the dollar's dominant role in global trade back in focus, he said. Uncertainty over how far the sanctions could be expanded is also fueling haven demand.

The dollar had fallen sharply after the US Treasury last week announced plans to expand buybacks of long-term government bonds. Concerns over the US fiscal outlook and political uncertainty had also driven money into alternative assets such as gold. The announcement on Iran sanctions helped the currency recover some of those losses.

Still, caution remains over whether the dollar can mount a sustained rebound. Luis Oganes, JPMorgan's head of global macro research, said he is not chasing further dollar weakness at current levels and is maintaining a neutral stance. The possibility that the Federal Reserve could still raise interest rates may support the dollar.