Dollar moves are being driven by geopolitics, not data. What comes next.

Subscribe to enjoy similar stories.With the dollar’s early war premium largely faded, the trajectory of the conflict in Iran is now a bigger driver than underlying economic data.The U.S. dollar index—a gauge measuring the dollar’s value against its key rivals—rose 2.41% in March, when uncertainty about the war was at its peak.

In the currency market moves are typically small, and this monthly gain marked the dollar’s largest rise since July 2025. As the initial scare from the war subsided, the dollar has fallen 1.34% so far in April.Middle East tensions still persist but the outcome now seems more open-ended.

A relatively less panicked environment has pushed investors away from the haven. It has also resulted in lower currency volatility, meaning currency swings are smaller as traders search for signals on the direction of the war.For evidence, look at the Deutsche Bank FX Volatility Index, which measures the market’s expectation of future currency volatility.

At 6.66 on Wednesday, it was significantly lower than at the start of the conflict. Considering the recent peak of 8.27 on March 27, the near 20% decline in the index in such a short span appears to be the sharpest drop since last April’s tariff tantrum.“Uncertainty has weighed on FX volatility, which is falling,” wrote Société Générale’s veteran foreign exchange strategist Kit Juckes in a Thursday note titled “FX remains paralyzed by binary possibilities.”“One wit blamed this on time zones – President Trump expresses views on social media after the European markets are closed and in the middle of the night in the Middle East,” wrote Juckes.