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13.03.202614:18 Forex Analysis & Reviews: Four reasons to buy dollar

Relevance up to 07:00 2026-03-18 UTC--4

Every cloud has a silver lining. Over the past month, the trade-weighted US dollar has rallied by about 3%. Most of the gain came after February 28, when the United States and Israel struck targets in Iran. Tehran shows no sign of backing down, which in turn has stoked US political ire. Donald Trump is loudly touting American military superiority, but Tehran appears unmoved.

The main drivers of dollar strength amid the Middle East conflict are its safe-haven status, the US role as a net energy exporter, a decline in risk-hedging flows by non-resident buyers of US assets, and a substantial short-covering squeeze in the greenback. Over two weeks of confrontation, speculative short positions have been reduced by roughly two-thirds.

Dynamics of USD and G10 yield differentials

Exchange Rates 13.03.2026 analysis

Monetary policy has taken a back seat. Yes, futures have scaled back expected Fed cuts in 2026, but derivatives on the ECB price in deposit rate hikes. As a result, the yield differential between Treasuries and G10 issuer bonds is narrowing, while the US dollar index is moving higher. The divergence shows that, right now, oil matters more than interest rates in the FX market.

The US dollar typically rallies as a safe-haven asset during global market shocks — and the Middle East conflict is proving that again. The greenback has outperformed gold, the Japanese yen, and the Swiss franc.

The United States becoming one of the world's largest oil producers supports the idea that the American economy can withstand even a Brent spike to $150/bbl. Currencies of exporters look comparatively stronger — witness the gains in the Canadian dollar and Norwegian krone — yet the US dollar still beats them.

Dollar and oil dynamics

Exchange Rates 13.03.2026 analysis

The mix of policy uncertainty under President Trump and the rapid rise in US equity indices in 2023–2025 encouraged non-resident investors to buy US stocks while hedging FX risk by shorting dollars. In the spring, the need for that hedge faded. The greenback is rising fast, while the S&P 500 is falling less than its European and Asian peers.

Exchange Rates 13.03.2026 analysis

In short, the US dollar has at least four trumps to continue dominating Forex — for as long as the Middle East conflict lasts. Given President Trump's intent to intensify strikes on Iran, that could be a long wait.

Technically, the EUR/USD daily chart shows a resumed downtrend and a test of the key pivot at 1.1445. The first assault failed, but bears aren't giving up. The first of two previously set short targets at 1.1450 and 1.1350 has been hit; the second is next. Staying short remains the prudent stance.

*تعینات کیا مراد ہے مارکیٹ کے تجزیات یہاں ارسال کیے جاتے ہیں جس کا مقصد آپ کی بیداری بڑھانا ہے، لیکن تجارت کرنے کے لئے ہدایات دینا نہیں.

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