Recently, I noticed a rather interesting market phenomenon. During the period in 2025 when the situation in the Middle East escalated, global currency markets were deeply affected by geopolitical tensions, and the U.S. dollar held firmly below the key level of 100 on the DXY index. The logic behind this is worth looking into carefully.

In the final analysis, the current currency trend is not determined by traditional economic fundamentals, but is entirely dominated by risk sentiment. You can see that traditional safe-haven currencies such as the Japanese yen and the Swiss franc continue to attract buying, while currencies like the Australian dollar and Canadian dollar that are linked to commodities are under pressure. This contrast really says a lot—investors are prioritizing capital preservation rather than chasing returns.

The dollar’s strength has two supports. From a technical perspective, the support at the 100 integer level on the DXY is quite solid—not only a technical issue, but also a reflection of market psychology. From a fundamental perspective, strong U.S. non-farm payroll data and service-sector inflation have caused the market to adjust its expectations for rate cuts, which provides tangible support for the dollar. But I think the more critical factor is the dollar’s position as the global reserve currency—during times of crisis, that is its moat.

The escalation of the situation in Iran became the trigger point. Risks in the Strait of Hormuz, concerns about energy supplies, and uncertainties in trade routes directly impacted the global currency markets. I remember that at the beginning of the Russia-Ukraine conflict in 2022, the DXY surged by more than 6% within a few weeks. The current situation is somewhat similar—markets are re-pricing risk.

This round of shock affects different currencies very differently. In Europe, due to its geography and energy dependence, the euro is under the most pressure. The Chinese yuan, meanwhile, remains relatively steady under stable management by the authorities. From the Asia-Pacific session, the Australian dollar weakened due to falling iron ore prices, and the whole region shows a cautious attitude.

What’s interesting is that this currency-market volatility continues to evolve. My focus is on indicators that can reflect market sentiment—oil prices, U.S. Treasury yields, the volatility index, and the stance of central banks. These things often provide signals about the next direction of currency moves.

Overall, the current currency landscape is one where the U.S. dollar is steady and other currencies diverge. Risk management has become the top priority for trading, and geopolitical uncertainty will continue to affect the market’s pace. For those who closely track FX movements, this is both a challenge and an opportunity.