The dollar has nearly erased all gains since the Iran war

Odaily Planet Daily News: The U.S. Dollar Index (DXY) has essentially given back all gains made since February 27th. The dollar was already weak before the outbreak of the Iran war, weighed down by a series of policies, including Trump's trade war and threats to the Fed's independence. The Federal Reserve's successive interest rate cuts last year, along with hedge funds and other investors building large short positions against the dollar, also weakened the currency.

After the war broke out, this situation briefly changed, as investors unwound short positions on the dollar and began betting that the Fed might raise interest rates. However, these gains have now completely evaporated, partly due to market optimism that the U.S. and Iran may soon resume negotiations.

Nevertheless, Jane Foley from Rabobank stated that policy divergence among global central banks is also a significant factor. Since the war began, the best-performing G10 currencies have been the Norwegian krone and the Australian dollar, as both countries' central banks recently raised interest rates due to concerns about worsening inflation. The British pound has also performed quite strongly, with market expectations for the UK's interest rate outlook shifting quickly and sharply from cuts to hikes this year. In contrast, investors currently see a low probability of the Fed raising rates. "Even if the Fed stays put, it is seen as relatively dovish, which has clearly been dragging down the dollar." (Jin Shi)