The dollar index is headed for its biggest monthly decline since June 2025 as the US-Iran hopes to end the war, even if oil bets and Fed bets keep it pegged.
Summary
- The dollar index is headed for its biggest monthly decline since June 2025 as traders unwind safe positions following the US-Iran ceasefire deal.
- Jinshi News reports that the index fell by about 1.8% in April, although recent rebounds caused by higher oil prices and changes in expectations by the Federal Reserve have caused some losses.
- Manulife portfolio manager Nathan Tuft expects the greenback to decline from here but remain “separately bound” as markets weigh a slowdown in the Middle East and the prospect of a tightening of US monetary policy in 2027.
The dollar is on track for its biggest monthly decline since June of last year as there is hope that the US-Iran standoff will stem the cooling demand for the greenback as a hedge against the crisis. Market-quoted data showed the dollar index fell about 1.8% in April, erasing much of its war-driven gains as traders retreated from tight shelter positions built up during the first two months of the conflict.
The setback follows a deal earlier this month between Washington and Tehran that halted major strikes and opened the door to formal peace talks, a move that eased fears of proliferation and regional expansion. As risks appeared to recede, investors shifted back to high-yielding commodities and other currencies, pushing the dollar index down from its recent trading range.
Oil and Fed expectations are slowing the slide
The dollar’s retreat, however, has not been a straight downward line. Crude prices have soared higher again on lingering worries, helping the dollar bounce back as energy exposures in other countries and equity markets reassess how quickly the Federal Reserve can return to easing.
Jinshi News notes that renewed bets on at least one Fed rate hike in 2027 have pushed up short-term Treasury yields, supporting the greenback after its first-month decline.
A tighter stance on policy rates generally makes US assets more attractive, narrowing the interest rate differential that had briefly moved against the dollar when headlines of a firefight first emerged.
Nathan Tuft, senior portfolio manager at Manulife, told the outlet that “looking forward, the dollar may weaken but it will continue to be relatively volatile,” suggesting that even if domestic demand is slowing, the currency is unlikely to depreciate entirely. The latest forecasts compiled by TradingEconomics point to the dollar index hovering in the high-90s to near-100 range in the near future, consistent with Tuft’s view that the move from here will be sideways rather than trending.
Why crypto traders care about a soft dollar
For crypto investors, a weak dollar is often accompanied by easier financial conditions and a stronger appetite for risk. Earlier this year, the dollar index’s biggest weekly decline coincided with a resurgence in inflows into Bitcoin and other majors as investors shifted out of cash and Treasuries into high-beta assets.
In previous cycles, a mix of Fed dovishness and dollar softness helped power Bitcoin’s rallies, as explained in a previous crypto.news story. Another story highlighted how falling currencies and a soft dollar environment can combine to create supply-side pressure for Bitcoin when risk sentiment improves.
Market strategists also warned that the country’s political shift in the US-Iran conflict could quickly change risk sentiment, hitting the dollar and digital assets. A recent crypto.news story highlighted how the growing tensions have boosted the security demand for the dollar and Bitcoin alike, underscoring how any disruption in the ceasefire talks could send the greenback very high again.
For now, however, the consensus view from Jinshi News and institutional executives is that the dollar has room to decline as the risk of war diminishes, but it will likely do so within a wide range rather than entering a new state.
