Brown Brothers Harriman expects the US dollar to trade sideways in the coming months, held in place mainly by interest rate differentials rather than geopolitics.
The firm projects the Dollar Index (DXY) will stay within a 96.00–100.00 band as global markets consolidate and monitor whether the ceasefire between the United States and Iran holds. The DXY was at 97.76 on Friday, April 17, 2026.
Risk appetite returns as oil stabilizes and stocks hit records
Strategist Elias Haddad said Brent crude is trading below $100 per barrel, while both equity and bond markets have held on to earlier gains. The MSCI World Index has set a record high, and long-term sovereign yields have edged lower across major economies as the dollar retraced earlier losses.
Haddad noted that although energy market disruptions may persist, conditions have stabilized compared with the sharp sell‑off seen in March. This improvement in sentiment has shifted attention back to yield spreads, helping to keep the DXY contained within its one‑year trading range.
From geopolitical shock to policy focus
With immediate fears around the US–Iran conflict receding, markets are no longer being driven by a flight to safety that typically lifts the dollar. Instead, pricing is once again being guided by relative economic performance and expectations for central bank policy.
Haddad described the dollar’s cyclical backdrop as broadly neutral over the next six to nine months, characterizing current moves as a relief bounce as Middle East tensions ease. This consolidation comes even as the DXY is heading for a third straight weekly decline, reflecting reduced safe‑haven demand amid hopes for a durable diplomatic outcome.
Support from foreign demand for US assets
The renewed focus on interest rate differentials is being reinforced by solid foreign demand for US securities. US Treasury data show foreign buyers purchased $1.615 trillion of long‑term US assets in the twelve months to February, underscoring continued appetite for dollar‑denominated holdings despite the currency’s recent softness.
This backdrop points to a more stable, range‑bound environment in the near term, offering relatively predictable currency moves for global trade and financing decisions as long as the ceasefire endures.
Longer‑term bearish view on dollar dominance
Despite the near‑term stability call, Brown Brothers Harriman maintains a long‑standing bearish structural view on the dollar. Haddad expects an acceleration in what he terms the “gradual erosion” of the currency’s dominance over the coming decades.
He identifies three persistent headwinds:
- weakening confidence in US trade and security policy
- doubts over fiscal discipline
- ongoing political pressure on the Federal Reserve
Haddad stressed that any significant reduction in the dollar’s central role in the global financial system is likely to be a drawn‑out process rather than a sudden regime change.
Inflation data complicate the Fed’s policy path
The latest March inflation report showed headline annual inflation rising to 3.3%, a two‑year high, largely driven by higher energy prices linked to recent geopolitical tensions.
Core inflation, which strips out food and energy, was more contained at 2.6%, indicating underlying price pressures are less severe than the headline figure suggests. This split leaves the Federal Reserve navigating a difficult balance between elevated headline inflation and more moderate core readings when setting interest rate policy.
In this environment, Brown Brothers Harriman argues that relative rate expectations, rather than new geopolitical shocks, are set to remain the key driver of the dollar’s range‑bound performance in the months ahead.
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