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New analysis from Canadian lender and investment bank Desjardins explains why the dollar is still on course to depreciate further.

Despite a period of U.S. dollar strength during February, the bank says to "expect the USD to stay under pressure."

"The rotation out of US tech continues, and Washington's policy chaos is denting sentiment. Geopolitics will be a wildcard given rising odds of an imminent US strike on Iran," says an analyst note from the Quebec-based bank.

The dollar index - a broad measure of USD value and performance - is set to record a first monthly gain in four, underlining the pressure the currency has come under since November.

Yet, February's half per cent gain is hardly convincing of a trend turn being imminent.

"The greenback bounced back after steep losses in January. But it's trading poorly, in our view," says Desjardins.

The dollar's failure to launch comes desipte a series of above-consensus data prints, including labour market data, that suggest a firm economy. A shift in the Federal Reserve's thinking to less-is-best on interest rate cuts is another development of recent weeks that should be driving USD outperformance.

Desjardins explains that a significant headwind to the dollar is a shift in equity flows away from the U.S. "High-frequency flow data shows investors have been piling into non‑US stocks as they rotate out of crowded US tech positions," says Desjardins.

A U.S. technology selloff - linked to fears that AI will eat into SAAS business models - is driving a move into 'old economy' stocks, of which Europe has plenty.

"In addition, policy chaos out of Washington continues to erode credibility. Some asset manager surveys, as well as the CFTC's Commitments of Traders report, show that net shorts against the greenback have risen to a four-year high," adds Desjardins.