The U.S. dollar looks ready to turn from loser to leader.

Strategists say the beaten-up dollar could be in the process of making a turn higher, thanks to Federal Reserve policy. The currency was at a four-month high against the yen Tuesday and was rising against a basket of currencies.

The dollar index was up slightly at 96.08 on Tuesday morning, but it was down nearly 6 percent for the year so far, after surging 7 percent in the fourth quarter of 2016 on expectations that President Donald Trump‘s policies could boost the economy.

The dollar has taken a bruising this year as the elation faded that Trump’s presidency would quickly bring about fiscal stimulus and tax reform. The dollar is down 8 percent against the euro this year and 13 percent against the Mexican peso.

Analysts say the dollar is now looking elsewhere in Washington for support, and it should follow Treasury yields higher with Fed policies as a driver. The Treasury market began its move two weeks ago, as central bankers around the world all sounded suddenly more hawkish. The Fed, gearing up to reduce its balance sheet and raise rates, sounded the most hawkish of all.

“I think we’re in a turning pattern, and we went from excessively overweight dollar positions at the end of the year to probably underweight positions,” said Robert Sinche, chief global strategist at Amherst Pierpont.

“I think we’re going to start squaring them up and move back to a dollar-positive environment,” he said. “We’re looking for a 3 to 4 percent rebound in the dollar overall, maybe a little more versus the euro and a little less versus the yen. I could see euro-dollar toward $1.04 and the pound down toward $1.20.”

Treasury yields have been edging higher since late June. The 10-year yield, for instance, rose from 2.12 percent on June 26 to 2.38 percent Tuesday.

European Central Bank President Mario Draghi was one of those who sounded more hawkish, reminding markets extraordinary easing policies won’t be around forever.

“When push comes to shove, the ECB is still talking about changing its words,” said Marc Chandler, chief currency strategist at Brown Brothers Harriman. “The Federal Reserve is talking about shrinking its balance sheet. Draghi said they’re not going to raise rates until they’re done with QE [quantitative easing].

“I’m not sure it’s a concerted effort, but with rates so low the officials are letting some steam out of the system,” Chandler said.

Markets have been doubting the Fed would go through with a third rate hike this year, but Fed officials reinforced their forecast in recent comments and in the minutes of the last meeting, released last week. San Francisco Fed President John Williams repeated his view again Tuesday, sending Treasury yields higher in early morning trading.

The dollar is also firming ahead of Fed Chair Janet Yellen’s testimony before Congress Wednesday and Thursday. She is expected to deliver the same message.

“I think we’ve unwound a lot of the Trump policy mix … but the reason we were bullish on the dollar last year before the election is the same reason we should be bullish now. It’s not about fiscal policy, it’s about monetary policy,” Chandler said.

The dollar index was up a half percent so far for the month of July. Chandler said he expects the dollar index to get to just above 100 by year-end. In 2015, it was as high as 140, and at the end of last year, it was at 103.75.

“Most people thought the dollar would strengthen [this year],” said Chandler. “A lot of people thought there would be a pullback on the overreaction to the Trump election, but the dollar has gone lower and stayed down longer than people thought. We started the year with very long dollar positions.”

Chandler said the recent economic data, like the jobs report, is showing signs of improvement, but housing and auto sales are flashing warnings.

“Other things look like they’re doing well. American shoppers have the wherewithal. Income is going up faster than consumption. I think we’ll see the U.S. economy strengthen in the second half of the year. That should boost people’s confidence in what the Fed is doing,” said Chandler.

Chandler said he agrees with the Fed’s assessment that the drop in inflation is transitory.

Retail sales and the Consumer Price Index inflation are expected Friday, and both are being monitored for what they could mean to the Fed.

“CPI has fallen for four months in a row, and it could stabilize. It could even tick higher,” said Chandler.

The strategists said their forecasts could change if there is some other unforeseen catalyst, but Trump could also be a factor. He would be a negative for the greenback if he takes a protectionist stand on trade. He is threatening steel and aluminum tariffs.

“He’s talked the dollar down,” said Sinche. “If you look at the relations to yield spreads the dollar should be about four percent higher than it is now.”

There could also be an adverse reaction if Congress does not move on the budget or debt ceiling this fall.