US dollar firms versus yen, Swiss franc as Middle East tension simmers
NEW YORK :The dollar strengthened against the safe-haven yen and Swiss franc on Monday, but weakened against most major currencies, as investors monitored the fighting between Israel and Iran for signs it could escalate into a broader regional conflict and braced for a week packed with central bank meetings.
Tehran, however, has asked Gulf state leaders to press U.S. President Donald Trump to use his influence on Israel for a ceasefire in return for Iran's flexibility in nuclear talks. That has partly helped the dollar recoup losses against the yen and Swiss franc.
Still, market participants mulled the prospect that Iran might seek to choke off the Strait of Hormuz - the world's most important gateway for oil shipping. This could raise broader economic risks from disruptions in the energy-rich Middle East.
Meanwhile, the U.S. military moved a large number of refuelling aircraft to Europe to give Trump options as Middle East tensions rise, and the U.S. aircraft carrier Nimitz was heading to the Middle East on a pre-planned deployment.
The dollar, which until recently had always been the ultimate safe haven in times of geopolitical or financial turmoil, was last up 0.38 per cent at 144.65 yen after rising nearly 0.4 per cent earlier on Monday. The euro rose 0.23 per cent to $1.1576.
The U.S. currency also rose against the Swiss franc at 0.8136 franc, while an index that measures the dollar against six peers declined 0.25 per cent to 98.02.
"Beyond the consolidation in U.S. dollar exchange rates, the lack of volatility in risk-sensitive currencies like the Japanese yen and Swiss franc suggest that investor confidence has been unfazed by the conflict between Iran and Israel," said David Song, senior strategist, at Forex.com.
U.S. crude futures fell 2.5 per cent, following Friday's sharp rally in the wake of Israel's preemptive strike on Iran.
"I still think that (the) surprise of the day is that oil, not gold nor the U.S. dollar has reacted positively to the turmoil," said Marc Chandler, chief market strategist at Bannockburn Global Forex. "The greenback might be losing its safe-haven status, but today is not the test."
Currencies that are positively correlated to risk such as the Australian and the New Zealand dollars were 0.6 per cent and 0.9 per cent higher, respectively, while the oil-exposed Norwegian crown was flat, after hitting its highest since early 2023 earlier in the day.
On Friday, investors had bought back into the dollar, which has lost more than 9 per cent in value against a basket of six other currencies this year as U.S. President Donald Trump's move to reshape the global trade order heightened economic uncertainty.
But analysts were less convinced that the trend could continue until there was more clarity on the tariff front.
"The 800-pound gorilla in the room is the U.S. tariff policy," Chandler said. "We've got the July 9 date that the so-called reciprocal tariffs are supposed to end. ... And so that sort of hangs over the market."
The U.S. Federal Reserve gives its latest policy decision on Wednesday, with the Israel-Iran conflict adding complexity for policymakers.
Investors remain nervous over Trump's deadline on trade deals due in about three weeks, while agreements with major trade partners, including the European Union and Japan, are yet to be signed.
They will look for progress in any bilateral meetings with the U.S. on the sidelines of a Group of Seven leaders' meeting in Canada.
CENTRAL BANK MEETINGS
Top of the agenda this week is a host of central bank monetary policy decisions, with the spotlight on the Fed.
The central bank is widely expected to leave borrowing costs steady, but investors will likely lap up its views on recent data that has broadly indicated softening economic activity even as risks to increasing price pressures stay high.
The Bank of Japan is expected to deliver its interest rate decision at the end of its two-day meeting on Tuesday, with traders largely pricing in no change to policy.
Expectations are that the central bank could also consider tapering its government bond holdings from the next fiscal year as the Japanese government pushes for more domestic ownership.
Central banks in Britain, Switzerland, Sweden and Norway are also slated to unveil their policy decisions this week.
Currency bid prices at 16 June 07:36 p.m. GMT
Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid
Dollar index 98.075 98.272 -0.19 per cent -9.60 per cent 98.367 97.685
Euro/Dollar 1.1567 1.155 0.15 per cent 11.73 per cent $1.1615 $1.1524
Dollar/Yen 144.65 144.08 0.39 per cent -8.08 per cent 144.64 143.69
Euro/Yen 167.32 166.42 0.54 per cent 2.51 per cent 167.46 166.14
Dollar/Swiss 0.8138 0.8113 0.31 per cent -10.33 per cent 0.8138 0.809
Sterling/Dollar 1.3586 1.3574 0.11 per cent 8.65 per cent $1.3621 $1.3536
Dollar/Canadian 1.3567 1.3582 -0.11 per cent -5.65 per cent 1.3607 1.3539
Aussie/Dollar 0.6529 0.6489 0.64 per cent 5.54 per cent $0.6552 $0.6469
Euro/Swiss 0.9411 0.9363 0.46 per cent 0.2 per cent 0.9419 0.9358
Euro/Sterling 0.8511 0.8505 0.07 per cent 2.88 per cent 0.8531 0.8504
NZ Dollar/Dollar 0.6064 0.6014 0.86 per cent 8.41 per cent $0.6088 0.6003
Dollar/Norway 9.9081 9.8522 0.57 per cent -12.82 per cent 9.9224 9.8653
Euro/Norway 11.46 11.4268 0.29 per cent -2.63 per cent 11.495 11.4235
Dollar/Sweden 9.4811 9.4751 0.06 per cent -13.94 per cent 9.5256 9.4353
Euro/Sweden 10.9676 10.9415 0.24 per cent -4.35 per cent 10.9825 10.944
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