The US Dollar Index has declined 2.57% in March, notching four losing weeks out of the last five.
A senior market analyst from FxPro said the dollar is preparing to "stare into the abyss."
"In the last six months, we have seen the quite typical and understandable reversal of the dollar."
The US Dollar Index has seen four losing weeks out of the last five, and the greenback could face more declines in the months ahead.
In March, the US dollar has shed 2.57% against a group of other major currencies, and erased most of its gains made in February. Since October, the US Dollar Index has fallen 8.8%.
"Although it cannot be ruled out that the quarterly portfolio shakeout will create traction in the Dollar, it is still more likely that the US currency will fall further in the coming quarters," senior market analyst at FxPro, Alex Kuptsikevich, said.
In his view, the dollar's sharp reversal from rising to falling in September marked a turning point. The greenback gained at a steady clip alongside the Fed's tightening of monetary policy up to that point, but it began to soften on prospects of easing financial conditions.
Earlier this month, policymakers made a ninth consecutive interest rate hike, raising the federal funds rate by 25 basis points.
Inflation has been steadily falling, with Friday data showing core Personal Consumption Expenditures — the Fed's preferred inflation gauge — clocked in cooler than expected.
And given March's unexpected financial turmoil that began with Silicon Valley Bank's collapse, traders have ramped up bets that the Fed will cut rates later this year.
"This is a typical story in the currency market, with the Fed at the forefront of the monetary cycle, which initially forms 12-18 months of dollar growth on rate hikes, but then triggers a move in the opposite direction," the analyst said. "In the last six months, we have seen the quite typical and understandable reversal of the dollar."
The dollar's technical signals also suggest downside ahead, Kuptsikevich noted, and the immediate downside target could be its 2023 low of 100.7, versus the current level of about 102.29.
"A consolidation below that level," Kuptsikevich wrote, "would cause the Dollar to stare into the abyss, where there is only minor technical support in the area of the 90.00 level."
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