The US Dollar Index (DXY) traded near 100.25 during Asian hours on Monday, edging up after stronger US jobs data and uncertainty in the Middle East. The index measures the US dollar against a basket of six major currencies.
US Bureau of Labor Statistics data released on Friday showed the economy added 178,000 jobs in March. This followed a revised 133,000 fall in February (revised from -92,000), and beat forecasts for a 60,000 increase.
The Unemployment Rate eased to 4.3%. The drop was linked mainly to a sharp fall in the labour force.
After the report, futures implied almost no chance of a move at the 28–29 April Federal Open Market Committee meeting. The CME FedWatch tool showed a 77.5% probability the Federal Reserve will stay on hold through the end of the year.
Tensions between the US and Iran also supported the dollar as a safe-haven asset. President Donald Trump set a Tuesday deadline for Iran to reopen the Strait of Hormuz and threatened strikes on power plants and bridges, while Iran said it would respond by targeting similar US-owned or related infrastructure.
Traders awaited the US March ISM Services PMI data due later on Monday. A weaker reading could weigh on the DXY in the near term.
Looking back to this time in April 2025, we saw the US Dollar Index push higher on strong jobs numbers and rising tensions in the Middle East. The dollar found support as a safe haven even though the market expected the Federal Reserve to hold interest rates steady for the rest of that year. This created a complex environment where economic strength was at odds with a neutral monetary policy outlook.
The situation today in April 2026 shows a similar pattern, but with greater intensity. The US economy just added an impressive 303,000 jobs in March, far stronger than the 178,000 we saw in March 2025. This robust labor market continues to provide a solid foundation for dollar strength against other currencies.
However, a key difference now is the Federal Reserve’s stance. Unlike in 2025 when markets priced in no rate changes, the CME FedWatch Tool currently shows traders are pricing in at least two rate cuts by the end of 2026. This expectation of future easing could put a ceiling on how high the dollar can go, creating a push-and-pull dynamic for traders to navigate.
Geopolitical risks also remain elevated, echoing the US-Iran standoff from 2025, which reinforces the dollar’s safe-haven appeal. With ongoing conflicts in Eastern Europe and the Middle East, any escalation could trigger a flight to safety, benefiting the dollar. Traders should consider using options on currency ETFs to hedge against or profit from sudden spikes in volatility, as the VIX remains sensitive to global headlines.
Given these conflicting signals, a viable strategy for the coming weeks involves selling volatility. Traders could look at selling out-of-the-money call and put options on the US Dollar Index, creating a range-bound position. This approach profits from the dollar remaining stable, caught between strong economic data and the prospect of future rate cuts.
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