Risks from US war are at peak, says Deutsche Bank. Why it's time to bet against the dollar
According to Deutsche Bank, the dollar may start to decline due to de-escalation of the conflict between the US and Iran / Photo: unsplash.com / Alexander Gray
Geopolitical risks due to the war in the Middle East are weakening, which means it's time for investors to prepare for the dollar's decline, according to Deutsche Bank.
Details
Risks associated with the war in Iran, now at the peak and will continue to decline, said the head of currency strategy at Deutsche Bank George Saravelos, quoted by Bloomberg. According to the analyst, this opens up an opportunity for positions against the U.S. dollar.
"Given developments pointing to a likely peak in risks from a war with Iran, we believe the situation is once again in favor of a short dollar position," Saravelos said. According to his forecast, the euro could exceed the $1.2 mark. This is about 2% more than the current rate.
The Bloomberg Dollar Spot Index was down 0.4% on Tuesday, April 14, and fell to its lowest level since March 2 - the first days of the conflict. The Canadian dollar reached, on the contrary, the maximum against the dollar for three weeks.
"The market is in a good mood. Traders are optimistic that reducing tensions diplomatically is achievable, leading to a slow build-up of risk positions," Amo Sahota, director of Klarity FX, said in a Reuters statement.
Context
The reason for the strategy review was signs of de-escalation, with the US and Iran discussing a new round of peace talks, Reuters sources said. This supported global equity markets and put pressure on oil prices.
In late February, after the U.S. and Israeli strikes on Iran, investors initially took a negative stance on the dollar, recalls Bloomberg. However, then the market turned around: the demand for the U.S. currency as a protective asset increased against the background of high energy prices and possible easing of the monetary policy of the U.S. Federal Reserve System. However, after the truce was declared and negotiations began, the dollar almost lost all of its gains since the beginning of the war.
This article was AI-translated and verified by a human editor
