By Jiaxing Li
HONG KONG, Aug 25 (Reuters) - The U.S. dollar struggled to hold onto gains against major peers on Tuesday, as investors parsed Washington's expanded Iran-related sanctions and renewed efforts to ease pressure on longer-dated Treasury yields.
The euro was a shade higher at $1.1668, hovering near a three-month peak hit last week, while sterling was 0.1% stronger at $1.3639, near its six-month peak.
U.S. Treasury Secretary Scott Bessent unveiled an expansion of sanctions against Iran on Monday,
and warned countries to cut business ties to Iran or risk being forced out of the dollar-based financial system.
"That potentially is one source of a slight reversal of the dollar weakness that we had at the end of last week," Ray Attrill, head of FX strategy at National Australia Bank, said in a podcast.
"The suggestion being that, maybe if you're going to be sanctioned and you're not going to have access to U.S. dollars, then you better buy some dollars first before that happens."
The Canadian dollar held flat at $1.3844, steadying after a 0.6% dip in the previous session, as the U.S. threatened to raise tariffs on Canadian goods after trade negotiations collapsed.
The Japanese yen strengthened a tad to 159.21 per dollar, having given back most of its intervention gains but still well off a multi-decade low of about 164.
The dollar index, which measures the U.S. currency against six major peers, was down marginally at 98.96 in Asia trades.
It climbed 0.16% overnight, lifting it from three-month lows amid a revived debasement trade, but appeared to be struggling to sustain the momentum.
The New Zealand dollar and the Australian dollar were up 0.1% ahead of the Reserve Bank of Australia's August policy meeting minutes release, last trading at $0.5965 and $0.7157, respectively.
In cryptocurrencies, bitcoin was last up 1% at $78,817.34, after registering its largest weekly gain in nearly 3-1/2 years last week.
YIELDS EASE, BUT RELIEF LIMITED
Treasuries found some support after CNBC reported that the U.S. Treasury could use part of its cash balance to buy back longer-dated bonds in an effort to ease borrowing costs.
That comes after Bessent surprised global bond investors last week by announcing the Treasury would double the size of its quarterly repurchases of longer-dated bonds after their yields reached the highest levels in nearly two decades.
However, the relief was limited. The yield on the 2-year note, which typically moves in step with expectations for Federal Reserve interest rates, was flat at 4.246%, while the yield on benchmark U.S. 10-year notes was at 4.704%.
Market participants are also awaiting Federal Reserve Chair Kevin Warsh's debut speech in Jackson Hole, Wyoming, on Friday, as traders seek clues about the recent jump in bond yields and reassurance about his independence from the Trump administration.
"Uncertainty over the Fed's reaction function, coupled with growing doubts about its commitment to prioritising inflation, has sharpened attention on Chair Warsh's upcoming remarks at Jackson Hole," Sim Moh Siong, FX strategist at OCBC, wrote in a note.
"Renewed policy uncertainty is constraining the scope for USD gains."
(Reporting by Jiaxing Li; Editing by Sonali Paul)
