Safe-haven yen, US dollar gain on rising MidEast tension

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FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
Holograms, which show different images and colours depending on the angle at which they are viewed, are seen on the new Japanese 5,000 yen banknote as the new note is displayed at a currency museum of the Bank of Japan, on the day the new notes of 10,000 yen, 5,000 yen and 1,000 yen went into circulation, in Tokyo, Japan July 3, 2024. REUTERS/Issei Kato/Pool/ File Photo

NEW YORK/TOKYO : The Japanese yen rose to a three-week high against the U.S. dollar on Monday, while the greenback rallied from an eight-month low, as geopolitical tension in the Middle East intensified, prompting investors to seek shelter in these currencies.

Another safe-haven, the Swiss franc, also rallied against major peers.

Trading activity is expected to be lighter than usual, with UK markets closed for a public holiday.

Israel and Hezbollah fired missiles at each other over the weekend in one of the biggest clashes in more than 10 months of border conflict. Hezbollah launched hundreds of rockets and drones at Israel early on Sunday, as Israel's military said it struck Lebanon with around 100 jets to thwart a larger attack.

"The story today is definitely hinging on geopolitical risk, and we can see the FX market reaction both in the pause in the U.S. dollar selloff and the yen gains this morning," said Helen Given, FX trader, at Monex USA in Washington.

She added that the yen has gained more than the other safe havens, particularly against the dollar, as it continued to benefit from an expected U.S. interest rate cut next month, which was confirmed by Federal Reserve Chair Jerome Powell last Friday in a speech in Jackson Hole, Wyoming.

In mid-morning trading, the dollar dropped to a three-week low against the yen of 143.45 and was last down 0.2 per cent at 144.18 yen.

Helping the yen strengthen, Bank of Japan chief Kazuo Ueda reaffirmed on Friday his resolve to raise interest rates if inflation stayed on course to sustainably hit the 2 per cent target.

Many market participants had expected Ueda to strike a less hawkish tone in a special session of parliament, called amid criticism the BOJ's surprise hike last month helped spark a rapid unwind of bearish yen bets and an aggressive sell-off of Japanese stocks.

The dollar did recover a bit against the yen after data showed U.S. durable goods orders surged 9.9 per cent in July, after falling in June. However, non-defense capital goods orders excluding aircraft, a closely-watched proxy for business spending plans, dipped 0.1 per cent after a downwardly revised 0.5 per cent increase in June.

The dollar index, a gauge of the dollar's value against six major currencies, inched up 0.1 per cent to 100.72, rising from its lowest since late December of 100.53.

The euro eased 0.2 per cent against the dollar to $1.1175, in a sign of a safe-haven move towards the greenback. Sources told Reuters that ECB policymakers are lining up behind another rate cut on Sept. 12.

The risk off sentiment also weighed on the Australian and New Zealand dollars and the Norwegian crown, which were all lower against the dollar, but benefited the Swiss franc.

The dollar fell 0.12 per cent against the Swiss franc to 0.8466 francs. The euro also fell 0.3 per cent against the Swiss currency to 0.9460.

Sterling eased 0.1 per cent against the dollar to $1.3204 after jumping as far as $1.3229 on Friday for the first time in 17 months. Bank of England head Andrew Bailey said on Friday it was "too early to declare victory" over inflation signalling a less aggressive stance on interest rate cuts than the Fed.

Currency              

bid

prices at

26

August​

02:47

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 100.72 100.66 0.06 per cent -0.64 per cent 100.92 100.

index 53

Euro/Doll 1.1175 1.1193 -0.16 per cent 1.24 per cent $1.1202 $1.1

ar 15

Dollar/Ye 144.16 144.34 -0.14 per cent 2.19 per cent 144.355 143.

n 45

Euro/Yen 1.1175​ 161.57 -0.29 per cent 3.51 per cent 161.48 160.

51

Dollar/Sw 0.8467 0.848 -0.17 per cent 0.59 per cent 0.8484 0.84

iss 57

Sterling/ 1.3202 1.3216 -0.09 per cent 3.76 per cent $1.3222 $1.1

Dollar 15​

Dollar/Ca 1.3465 1.3512 -0.34 per cent 1.58 per cent 1.3515 1.34

nadian 64

Aussie/Do 0.6779 0.6797 -0.25 per cent -0.56 per cent $0.6798 $0.6

llar 768

Euro/Swis 0.9462 0.9486 -0.25 per cent 1.9 per cent 0.949 0.94

s 53

Euro/Ster 0.8463 0.8467 -0.05 per cent -2.37 per cent 0.8475 0.84

ling 51

NZ 0.6211 0.6233 -0.34 per cent -1.69 per cent $0.6233 0.61

Dollar/Do 98

llar

Dollar/No 10.5269​ 10.453 0.71 per cent 3.87 per cent 10.5705 10.4

rway 505

Euro/Norw 11.7642 11.701 0.54 per cent 4.81 per cent 11.8199 11.7

ay 025

Dollar/Sw 10.192 10.1636 0.28 per cent 1.24 per cent 10.2341 10.1

eden 69

Euro/Swed 11.3898 11.3782 0.1 per cent 2.38 per cent 11.4365 11.3

en 726

Source: Reuters

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