The euro is seeing a rise in the global currency options market. According to reports, traders have moved 15-30% of US dollar contracts to the euro. The development comes amid increased geopolitical tensions and trade wars. The move has also sparked renewed de-dollarization sentiment among market participants.

De-Dollarization Advances As The Euro Takes Charge

According to Oliver Brennan, options strategist at BNP Paribas SA, “If we’re moving to an environment in which the European flow story is more important, then we could be moving to an environment in which it’s euro pairs which are driving everything.”

The euro has rallied 11% against the dollar this year. The figure marks the highest the euro has been since 2021. According to hedge fund manager Paul Tudor Jones, the dollar could fall another 10% over the next year.

The recent rise in the euro’s role is likely due to increased uncertainties around US foreign policy and trade wars. The US hit three Iranian nuclear sites last week, fuelling further escalation possibilities. Iran has said that diplomacy is now out of the question. Many fear a prolonged crisis over the coming months.

Also Read: Hong Kong Passes Stablecoin Law Amid Global De-Dollarization Shift

While the euro has seen an increase in the currency options market, the US dollar has seen some strengthening during times of conflict. The dollar index (DXY) rose to a 20-year high after Russia invaded Ukraine. The DXY’s rise in 2022 could be due to safe-haven demand for US assets. This aspect of the dollar may change this time around. According to Brennan, “the market sees the euro as more of a safe haven than the dollar.”

The US dollar may see a dip in currency options markets, but it may also experience a rise in adoption as traders try to navigate the uncertain environment. The dollar has been one of the safest bets during times of uncertainty. US trade policy, even among its partners, has been met with a lot of criticism. The euro could emerge as an alternative for many.