As the risk aversion tide recedes and expectations of interest rate cuts rise, the USD bulls are collectively retreating!

BlockBeats News, April 22 — With expectations for easing the Middle East situation heating up, the US dollar’s safe-haven attribute has significantly weakened. Combined with a renewed return of market bets on the Federal Reserve cutting rates within the year, global capital is accelerating its withdrawal from US dollar assets. Data shows that the US Dollar Index has fallen about 2.3% since its late-March peak, or marking the worst single-month performance since last August.

Wall Street institutions generally believe that this round of US dollar weakness is fundamentally driven by a dual force: the fading of the safe-haven premium and a shift in policy expectations. JPMorgan has restarted its strategy to short the US dollar, turning to long risk currencies such as the Australian dollar; Bank of New York Mellon also noted that emerging market currencies have rebounded across the board, reflecting a clear rebound in global risk appetite.

Meanwhile, market expectations for a Fed rate cut keep heating up, and capital is flowing back into high-yield and carry trade assets. Currencies that had previously been under pressure—such as the euro, the South Korean won, and the South African rand—have rebounded significantly, with some gains exceeding 2%.

Institutions further noted that the cooling of the Middle East conflict is only a short-term catalyst; in the long run, rising US policy uncertainty and the global trend of reducing holdings of US assets may continue to exert downward pressure on the dollar. Major investment banks expect that over the next year the euro against the US dollar could rise to 1.20, and the weak-dollar backdrop may persist further.