DBS analysts Philip Wee and Chang Wei Liang argue the US dollar\u2019s broader downtrend has paused, supported by conflict-driven demand for safe assets and higher oil prices, while warning that doubts about Federal Reserve independence and US fiscal sustainability remain key risks.<\/p>\n
They describe a temporary geopolitical support level for the dollar tied to \u201cOperation Fury\u201d and say elevated oil prices have delayed a \u201cUSD mutiny.\u201d<\/p>\n
They note the US-Israel strikes were conducted without wider consultation and that some G7 allies have not provided naval support, citing France, Germany, and Italy, which they frame as a move away from the American security umbrella.<\/p>\n
They link US isolation and renewed global inflation pressure to a potential Strait of Hormuz closure, arguing this has pushed market participants to reassess US Treasury bonds as a truly risk-free asset.<\/p>\n
They add that once oil flows resume, capital may rotate toward currencies with stronger fundamentals; the article also notes it was produced with the help of an AI tool and reviewed by an editor.<\/p>\n
We have seen the predicted war-driven haven demand play out in recent months, lifting the Dollar Index toward multi-year highs near 115 as Brent crude topped $140 a barrel in January, but that temporary geopolitical floor now appears to be weakening as the USD pulls back toward 110 with diplomacy cautiously reopening and supply concerns easing.<\/p>\n
The underlying structural risks identified earlier are becoming more visible in capital flows, with Treasury data for January 2026 showing a $50 billion net outflow from foreign official accounts\u2014the largest since the 2020 pandemic scare\u2014signaling growing investor reassessment of US debt amid fiscal sustainability concerns.<\/p>\n
The unilateral nature of US actions in late 2025 has widened rifts among allies, and last week\u2019s G7 finance ministers\u2019 statement omitted any mention of coordinated policy support, a notable break from historical precedent that underscores a weakening of the dollar\u2019s standing as the unquestioned global reserve.<\/p>\n
Given this setup, traders could consider positioning for a reversal of the dollar\u2019s recent strength, for example by buying out-of-the-money put options on the USD Index (DXY) with 3- to 6-month expirations as a defined-risk way to express a bearish view.<\/p>\n
Opportunities may also emerge in currencies with stronger fundamentals that were suppressed by the dollar rally, including call options on EUR\/USD alongside resilient Eurozone PMI data, and potentially shorting USD\/JPY via futures if a global risk-on turn drives broad USD weakness versus the yen.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" DBS: Dollar downtrend paused by \u201cOperation Fury\u201d safe-haven demand and oil, but Fed, fiscal doubts persist.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-45722","post","type-post","status-publish","format-standard","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\/45722","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\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=45722"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/45722\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=45722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=45722"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=45722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}