US Stock Market | War-driven dollar strength likely short-lived as valuation concerns persist

The recent surge in the US dollar amid escalating tensions in the Middle East is likely to be short-lived, according to a senior fund manager at Invesco Ltd., who believes the currency remains fundamentally overvalued despite recent fluctuations, Bloomberg reported.

Kristina Campmany, a senior portfolio manager at the $2.3 trillion asset manager, has indicated that the greenback’s strength following the outbreak of the Iran conflict reflects a temporary flight to safety rather than a shift in its long-term trajectory. According to her assessment, the dollar continues to trade at elevated levels compared to major global currencies such as the Japanese yen, Australian dollar and Chinese yuan, Bloomberg said.

The US dollar had already been under pressure earlier this year, declining notably after trade tariffs were imposed by President Donald Trump in April. Although the currency has recovered modestly since late February, the broader trend still points to underlying weakness.


Campmany’s view aligns with a growing chorus in Washington, where policymakers across party lines have raised concerns about the dollar’s long-standing strength. Over the years, several US officials have argued that global currency dynamics have worked against American exports, with some countries accused of keeping their currencies artificially weak to gain trade advantages.

Recent remarks by US Commerce Secretary Howard Lutnick have added to this narrative, highlighting how currency dynamics may have historically weighed on the competitiveness of US goods in global markets. These concerns are now gaining renewed attention as geopolitical shifts and trade realignments begin to reshape the global economic order.

A key theme emerging from Campmany’s outlook is the gradual transition toward a more multipolar world, where economic influence is less concentrated and capital flows become more diversified. This structural change could reduce the premium investors are willing to assign to the US dollar, particularly as alternative markets deepen and mature.

Currency cycles, she suggests, tend to play out over extended periods, often lasting close to a decade. In the current cycle, the forces that could weaken the dollar — including geopolitical fragmentation, evolving trade relationships and shifting capital allocation — remain firmly in place and may even be intensifying, Bloomberg said.

Despite this longer-term bearish view, the dollar has once again demonstrated its resilience as a safe-haven asset during periods of crisis. The ongoing tensions in the Middle East, particularly disruptions around critical oil transit routes such as the Strait of Hormuz, have driven a surge in crude prices. This, in turn, has provided near-term support to the US currency, given its deep integration with global energy markets and America’s position as a leading oil producer.

However, as Bloomberg notes, such support may prove temporary if broader structural headwinds continue to dominate the narrative. For global investors, the key question now is whether the dollar’s safe-haven appeal can outweigh the mounting pressures of a changing economic landscape.