Traders have abandoned their bets on a stronger dollar as hopes for an end to the Iran war erode its appeal as a haven currency and market attention switches to the possibility of interest rate cuts from the Federal Reserve.
The US currency, which surged in the early part of the conflict as global markets stumbled, is down 2.3 per cent from its late March peak against a basket of its peers and on course for its worst month since August. The euro has recovered almost all the losses it made in the conflict’s first weeks.
Investors and strategists said hopes for peace had sapped the dollar’s earlier strength, which was partly based on the US’s relative insulation from the effects of a protracted global energy shock. At the same time, a recovery in risky assets has boosted emerging market currencies at the dollar’s expense.