Dowfu Bank: Middle East War Reshapes Safe-haven Demand, Institutional Dollar Buying Reaches Two-year High.

According to Davos Bank, institutional investors are buying the US dollar at the strongest level in nearly two years as demand for safe-haven assets has been driven by the Middle East conflict. Since the outbreak of the Iran conflict on February 28th, the US dollar spot index has risen by nearly 1.8%, as investors flock to the US dollar and rising oil prices provide support to the dollar. Davos Bank strategist Lee Ferridge said in an interview, "Since the conflict erupted, we have seen the US dollar re-establish its status as the global safe-haven currency, leading to strong buying. Our fund flow indicators show that institutional investors' buying of the dollar has reached the highest level in nearly two years." Before the conflict erupted, many traders were betting on a fall in the US dollar. Since then, they have reduced these positions. The US dollar has risen in sync with energy prices, while the Euro and the Yen have performed worst in the G10, highlighting their susceptibility to rising commodity prices. Ferridge said, "It's worth noting that many people have been underweight the US dollar for some time, and this situation has persisted. Thus, with the US dollar strengthening over the past 10 days, we see investors beginning to reduce these short positions." Data from the US Commodity Futures Trading Commission (CFTC) shows that speculative traders' bearish sentiment towards the US dollar has fallen to the lowest point since January. In the latest report for the week ending March 3rd, their short positions were around $12.3 billion, down from around $18.9 billion the previous week. The CFTC will release data for the week ending March 10th on Friday. The US dollar's rebound during the conflict comes after the worst year in eight years. Influenced by President Trump's aggressive trade policies, the US dollar fell more than 8% in 2025, forcing investors to move some of their funds overseas to hedge against further weakening of the dollar. Ferridge said that in April last year, with the announcement of significant US tariffs, investors increased such hedging operations, but as the dollar began to rebound, the demand for hedges eased.