US Dollar Index Erases All Gains Since February 27 Amid Iran Conflict

According to Odaily, the US Dollar Index (DXY) has erased all gains accumulated since February 27 following the Iran conflict. The dollar had briefly strengthened after the war erupted as investors unwound bearish positions and bet on potential Federal Reserve rate hikes, but these gains have since reversed.

Global central bank policy divergence is a key factor, according to Jane Foley of Rabobank. Among G10 currencies, the Norwegian krone and Australian dollar have performed best since the conflict began, as both central banks recently raised rates over inflation concerns. The British pound has also strengthened significantly as market expectations for UK interest rates shifted sharply from cuts to hikes this year. By contrast, investors currently view Federal Reserve rate hike odds as low, with the central bank perceived as dovish.