



The dollar’s global reign: The Iran war has strengthened the greenback but the story is far from over
The dollar has been winning against gold. Since the start of the Iran war on 28 February, the dollar has strengthened against most major currencies. In an earlier oped in Mint on 9 March (bit.ly/413F9Ry), I delved into the anomalous trend of the dollar strengthening by 1.5% and gold weakening by 1%.
Since then, the dollar index has gained a further 1.1% while gold has fallen by a further 15%.Given the competing narratives on the war’s trajectory, it is difficult to fathom how the scales will eventually tilt. One may guess that America’s ‘Ashvamedha run’ has not gone by plan; The Economist’s latest cover story is titled ‘Advantage Iran’. However, if one undertakes a dispassionate analysis of the direction of currency and bullion markets, a different story emerges.
The strengthening dollar not only reaffirms its status as a safe-haven currency during turmoil, but suggests its privileges as a reserve currency are not weakening. Both of these would not have been possible if America’s military and strategic dominance had materially reduced. But there are tactical reasons as well for the dollar’s strength.Safe haven or one-eyed ruler among the blind? The currencies of almost all G-20 countries (the largest 20 global economies) have weakened against the dollar in March.
Read on livemint.com