Risk aversion has cooled down, combined with expectations of interest rate hikes, the US dollar has had its worst performance in nearly a year this month.

The US dollar recorded its worst monthly performance in nearly a year in April. As market expectations heated up for a potential easing and peace negotiation between the US and Iran, investors reduced their bets on safe-haven assets, leading to a weakening of the US dollar. Data shows that the Bloomberg Dollar Spot Index fell by 1.9% in April, marking the largest drop since June of last year. The majority of this decline occurred after the ceasefire agreement between the US and Iran earlier this month. However, with recent increases in oil prices and renewed market speculation about the Federal Reserve potentially raising rates next year, the downward trend of the US dollar has slowed. Analysts point out that the US dollar significantly strengthened in March due to escalation in the Middle East conflict, but as tensions eased, its safe-haven appeal decreased significantly. US President Trump recently stated that sanctions on Iranian ports will not be lifted until an agreement is reached on the Iran nuclear issue, while also considering military options, indicating continued uncertainty in the situation. On Thursday, after Japanese authorities intervened in the foreign exchange market to support the yen, the US dollar fell by 0.8% at one point. Meanwhile, Brent crude oil futures retreated from their four-year high, further weakening support for the US dollar. That day, G10 currencies generally strengthened, with the yen leading the way, and the Swiss franc, Australian dollar, and New Zealand dollar all rising by over 1%. Interest rate expectations also affect the US dollar trend. The Federal Reserve previously maintained interest rates and suggested that economic impacts from the war may limit future rate cuts, leading to increased speculation in the market about rate hikes next year, temporarily supporting a rebound in the US dollar. In contrast, other major central banks have clearer positions on fighting inflation. It is expected that the Reserve Bank of Australia and the Central Bank of Norway may raise rates earlier, driving both the Australian dollar and the Norwegian krone to rise by over 4% this month. Strategists at Deutsche Bank pointed out that energy price shocks may prompt multiple central banks to accelerate policy tightening, while the relatively cautious stance of the Federal Reserve weakens the US dollar's status as a "high-yielding currency." In the context of high energy prices, currencies benefiting from commodities have shown stronger performance. Analysts suggest shorting the US dollar while going long on the Australian dollar, Norwegian krone, as well as commodity-related currencies in emerging markets such as the Brazilian real and Mexican peso. Meanwhile, the euro also rebounded in April. Despite its high dependence on Middle Eastern energy, which had previously pressured the euro due to rising oil prices, the euro rose by about 1.6% against the US dollar this month as the European Central Bank's stance became more hawkish. Nathan Thooft, Senior Portfolio Manager at Manulife Investment Management, stated that the US dollar may continue to be under pressure in the future, but with the relatively strong US economy and lingering global uncertainty, the decline may be limited, overall presenting a range-bound trend. Viraj Patel, strategist at Vanda Research, also pointed out that if market expectations further strengthen for "high US interest rates for a longer period of time," the US dollar could rebound; however, in the absence of clear catalysts, the US dollar is likely to remain in a range-bound pattern.