The U.S. dollar index tracked by Bloomberg fell one percent to a four-week low. This was due to a sharp drop in oil futures. Treasury bonds also showed a decline in yields, further weakening support for the dollar as money markets renewed expectations of lower interest rates in the U.S. this year.
The dollar has lost more than half of its gains since the war began. On Wednesday, it weakened particularly sharply against risk-sensitive currencies such as the South African rand and Swedish krona, which strengthened about two percent each.
The euro, yen, British pound and Swiss franc also rose amid the weak dollar. Dubai’s stock market posted its strongest gains in a decade. Platinum and palladium prices began to rise on news of stabilization. And major players betting on the continuation of the war suffered their biggest losses since the pandemic.
Despite the current decline, analysts (e.g. from TD Bank) predict that the dollar could recoup 2026 losses in the months ahead by adjusting interest rates.
The dollar strengthened 2.4 percent last month due to its appeal as a defensive asset and confidence that the U.S. economy is better protected from the global energy crisis because the country is a net exporter of oil. The conflict also caused traders to lower their forecasts for an expected cut in interest rates.
