Hedge funds have shifted to a bearish stance on the dollar as Middle East peace negotiations progress.

Hedge funds are becoming more pessimistic about the dollar as expectations of US–Iran peace talks erode the currency’s recent gains driven by geopolitical tensions, according to Morgan Stanley data.

By April 10, investors had expanded their bearish positions on the dollar, reversing March’s trend when the Bloomberg Dollar Index climbed 2.4%—its strongest monthly performance since July—on safe-haven demand during the Middle East conflict.

In April, however, the index has dropped 1.8%, including a seven-day losing streak through Tuesday, as the US and Iran initiated talks to end the six-week standoff.

Analysts Molly Nickolin, David Adams, and Andrew Watrous noted that “the path to a weaker dollar is widening rather than narrowing.”

They added that while a ceasefire could boost risk-sensitive currencies in the short term, the dollar’s medium-term decline is likely to be more pronounced against major currencies like the euro, yen, and Swiss franc.