The US Dollar Index (DXY) fell for a second session and traded near 97.50 in Asian hours on Monday. The move followed uncertainty over US trade policy and weaker economic data.<\/p>\n
The US Supreme Court struck down most of President Donald Trump\u2019s emergency tariff authority. Trump said he would pursue a 15% global import tariff, up from 10%, using other trade laws.<\/p>\n
US data also weighed on the dollar. The economy grew 1.4% in Q4 2025, while core PCE inflation rose 3.0% year on year in December.<\/p>\n
Geopolitics added to market caution. The New York Times reported Trump was weighing limited airstrikes on Iran, with a wider attack considered if earlier steps fail.<\/p>\n
The US Dollar is the official US currency and is used in some other countries. It accounts for over 88% of global foreign exchange turnover, or about $6.6 trillion in daily transactions, based on 2022 data.<\/p>\n
Federal Reserve policy affects the dollar mainly through interest rates. The Fed targets 2% inflation and can use quantitative easing, which tends to weaken the dollar, or quantitative tightening, which tends to support it.<\/p>\n
Given the US Dollar Index’s fall to 97.50, we see the market reacting to a difficult mix of slowing growth and high inflation. The Q4 2025 GDP figure of 1.4% alongside a 3.0% core PCE reading puts the Federal Reserve in a bind, making future policy moves highly unpredictable. This uncertainty suggests that simply shorting the dollar may be too risky due to potential safe-haven bids.<\/p>\n
The combination of trade policy confusion and geopolitical risk is a classic recipe for higher market volatility. We can look back to periods like the 2019 trade disputes, when currency volatility gauges saw spikes of over 20% in short periods. Therefore, traders should consider buying options strategies like straddles or strangles on major pairs like EUR\/USD, which profit from large price swings in either direction.<\/p>\n
For those with existing long-dollar positions, the threat of a new 15% global tariff introduces significant downside risk. It would be wise to purchase put options on the US Dollar Index or related currency futures as a direct hedge. This acts as insurance against further policy-driven dollar weakness in the coming weeks.<\/p>\n
We are also closely watching the USD\/JPY pair, as the yen often acts as a primary safe-haven currency during periods of US-centric uncertainty. The current situation could strengthen the yen more than the dollar, pushing the USD\/JPY pair lower. Options that bet on a fall in this pair could provide a valuable position against escalating global tensions.<\/p>\n
The reports concerning potential US airstrikes on Iran add another layer of risk, particularly for energy markets. We have historically seen WTI crude prices jump by over 10% in a matter of days on similar Mideast tensions. Traders should monitor volatility in oil options, as a spike in energy prices would further complicate the global inflation and growth outlook.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Dollar index dips near 97.50 as trade-policy uncertainty, weak data, and Iran-strike tensions pressure greenback.<\/p>\n","protected":false},"author":62,"featured_media":16959,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42522","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42522","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=42522"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42522\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16959"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42522"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42522"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42522"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}