Demand for Dollars in Swaps Ebbs Alongside Global Risks

A worker hands out US dollar banknotes at a currency exchange bureau in Lagos, Nigeria, on Monday, Jan. 26, 2026. Participation by foreign investors in Nigeria's equity market rose the most in 2025 to its highest level in 19 years, as government fiscal and monetary reforms boosted investor confidence. Photographer: Victor Adewale/Bloomberg Photo by Victor Adewale /Bloomberg

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(Bloomberg) — By at least one metric in the $9.5 trillion foreign-exchange markets, demand for the dollar is ebbing amid the tenuous ceasefire between the US and Iran.

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Measures of the so-called cross-currency basis — the extra cost investors pay or receive when sourcing dollars overseas instead of the US — show a steady waning in appetite for the greenback in recent days, particularly against the euro and Swiss franc.

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“This is a simple reversal of the dollar trade,” said Nathan Thooft, a senior portfolio manager at Manulife Investment Management. “It was one of the few beneficiaries of the crisis as it developed, and now as there are signs of de-escalation that bid is reversing course.”

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But while the basis is indicative of the global investor appetite for US cash, it’s not a forward-looking measure of what the dollar will do next. Predicting that is a different task altogether, especially in a market primed to move on the latest war headlines and comments from President Donald Trump.  

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“It is really difficult to anchor views and portfolio positioning to a single macro narrative right now,” said Thooft, chief investment officer of the firm’s equities and multi-asset solutions teams managing $309 billion.

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In the spot market Friday, the dollar fell after March US consumer inflation data showed headline prices growing the most in nearly four years amid a surge in gasoline costs — but the core measure of inflation, which excludes food and energy impacts, rose 0.2% on the month, below expectations. 

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“All else equal, this puts less pressure” on the Federal Reserve, Patrick Locke, a currency strategist at JPMorgan Chase & Co., said after the data. That will “compound the drag from the ceasefire that already forced an unwinding of dollar risk premium.”

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Bloomberg’s measure of the dollar is now set for a 1.5% decline on the week, which would be the worst performance since January.

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What Bloomberg Intelligence Says…

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“Dollar bulls remain at the mercy of Iran developments into 2Q, with the April 8 price action after the two-week US-Iran ceasefire deal validating our assessment that the near-term dollar outlook is binary, with an end of the conflict taking us back swiftly to our bearish view from early 1Q.”

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Audrey Childe-Freeman and Thinh Nguyen, BI Strategists. For the full note click here. 

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The cross-currency basis market gauges how much it costs to exchange one currency for another beyond what is implied by borrowing costs in the cash markets. It effectively sets the price of foreign-exchange hedging for global investors and is an indication of flows between economies and asset classes.