To put Chet's reply a different way, don't think of $'...' as a dollar expansion ( like ${} $() or $(()) ) it isn't, it is just another form of quoting (very similar to '' quoting) and is processed in the same way, at the same places, as '' quoting would be.
In "'xxx'" the single quotes are just characters. So in "$'...'" the $' are just characters (though probably strictly undefined behaviour, as $ followed by something that is not a var name (or positional or special param name) and is not { or ( is undefined, and $ inside " is supposed to be expanded, but cannot be here. kre