The dollar has basically erased all of its gains since the Iran war

Odaily Odaily reports that the US Dollar Index (DXY) has basically erased all of its gains since February 27. The dollar was already in a weak position before the outbreak of the Iran war, weighed down by a series of policies, including Trump's trade war and his threats to the Federal Reserve's independence. The Fed's consecutive rate cuts last year, along with massive short dollar positions established by hedge funds and other investors, have also weakened the dollar.

This situation changed for a time after the war broke out, as investors unwound their short dollar positions and began betting that the Fed might raise interest rates. But now all those gains have disappeared, partly due to market optimism that the US and Iran might resume negotiations soon.

However, Jane Foley of Rabobank says policy divergence among global central banks is also an important factor. Since the start of the war, the best-performing G10 currencies have been the Norwegian krone and the Australian dollar, as both central banks have raised rates recently due to concerns about worsening inflation. The British pound has also performed quite strongly, with market expectations for the UK interest rate outlook having rapidly and significantly shifted from rate cuts to rate hikes this year. Meanwhile, investors currently see a low probability of the Fed raising rates. "Even if the Fed holds steady, it is relatively dovish, and has clearly been dragging on the dollar." (Jin Shi)