Dollar wobbles as investors monitor Israel-Iran conflict ahead of Fed decision
The U.S. dollar wavered against most major currencies on Wednesday, as fighting between Israel and Iran left investors nervous ahead of a keenly awaited Federal Reserve decision on interest rates later in the day.
Israel has pounded Iran over the past six days to halt its nuclear activity and has asserted the need for a change of government in the Islamic Republic.
The U.S. military is also bolstering its presence in the region, Reuters reported, sparking speculation of U.S. intervention that investors fear could widen the conflict in an area replete with energy resources, supply chains and infrastructure.
Against this backdrop, the dollar has found support as a safe haven, firming roughly 1% against the Japanese yen, Swiss franc and euro since Thursday and helping it to shave declines from earlier in the year.
The greenback had lost more than 8% so far this year due to eroding confidence in the U.S. economy due to President Donald Trump's trade policies.
"The dollar is still a safe haven because of its depth and liquidity, so, yes the structural forces are diluting the dollar safe-haven activities, but they're not eroding them completely," said currency strategist Rodrigo Catril at National Australia Bank.
"But in a scenario of big risk aversion, the dollar will still gain support but maybe not to the same extent it has managed in the past."
The dollar wavered between small gains and losses against the yen and had touched a one-week top in early Asia trading hours. The greenback was last down 0.2% and fetched 144.90 yen.
The Swiss franc was flat at 0.816 per dollar and the euro edged up 0.2% at $1.150.
A broader index tracking the greenback against six other currencies slipped 0.1% after a 0.6% jump in the previous trading session.
An increase in crude oil prices to about $75 a barrel has also weighed on the euro and yen given the European Union and Japan are primarily net crude importers as opposed to the U.S., which is a net exporter.
Investors' next point of focus is the Fed, which is set to decide whether to change its interest rates.
Recent data showed the U.S. economy was slowing as Trump's erratic policymaking style increased uncertainty. Higher crude prices due to conflict in the Middle East are also complicating the Fed's task.
Traders expect the central bank to leave borrowing costs unchanged and will be keen to hear the Fed's outlook for interest rates this year and the overall health of the economy.
"The labour market is definitely their key attention," said Thomas Poullaouec, head of multi-asset solutions APAC at T. Rowe Price.
"If we see an acceleration of people being fired, that would be (reflected in) weekly jobless claims and that could trigger the threat to reassess. But I would still expect inflation to be more on their radar and the labour market to remain resilient in the short term."
A weekly report on jobless claims is expected later in the day out of the U.S., while on the policy front, central bank decisions are also due from Switzerland, Norway and Sweden later in the week.
In Britain, sterling firmed 0.26% to $1.346 as markets assessed data that showed inflation cooled as expected to an annual rate of 3.4% in May, ahead of the Bank of England's policy verdict on Thursday.
An area of frustration for investors was a Group of Seven meeting in Canada yielding little on the tariff front, ahead of Trump's early July deadline for additional levies.
Trump said Japan was being "tough" in trade talks and the European Union had not yet offered what he considered a fair deal. (Reporting by Johann M Cherian in Bengaluru; Editing by Christopher Cushing and Jamie Freed)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Dubai Eye
an hour ago
- Dubai Eye
Air India warned for breaching pilots' flight duty timings
India's aviation watchdog has issued a warning to Air India for "repeated and serious violations" related to pilot duty scheduling and oversight, according to government directives reviewed by Reuters on Saturday. The Directorate General of Civil Aviation (DGCA) directed Air India to remove three company executives from crew scheduling roles - a divisional vice president, a chief manager of crew scheduling and one planning executive - for lapses linked to flights from Bengaluru to London on May 16 and May 17 that exceeded the stipulated pilot flight time limit of 10 hours. The June 20 order cited "systemic failures in scheduling protocol and oversights" and criticised the lack of strict disciplinary measures against responsible officials. The latest action by the aviation authority against the airline is unrelated to this month's crash of an Air India Boeing plane that killed all but one of the 242 people onboard but signal heightened scrutiny of the airline. On Thursday, Reuters reported the authorities had also warned Air India for breaching safety rules after three of its Airbus planes flew despite being overdue for checks on emergency equipment of escape slides. The latest order by assistant director of operations at the DGCA, Himanshu Srivastava, said: "Of particular concern is the absence of strict disciplinary measures against key officials directly responsible." In a statement to Reuters, Air India said it has implemented the DGCA order and in the interim, the company's chief operations officer will provide direct oversight to the Integrated Operations Control Centre. "Air India is committed to ensuring that there is total adherence to safety protocols and standard practices," it added. The DGCA stated in its order that Air India had voluntarily disclosed the violations. Air India was taken over by the Tata Group in 2022 and faces many challenges in its attempts to rebuild its image, after years of criticism from travellers for poor service. The Indian regulator, like many abroad, often fines airlines for compliance lapses. India's government in February told parliament that authorities had warned or fined airlines in 23 instances for safety violations last year. Around half of them - 12 - involved Air India and Air India Express. The biggest fine was $127,000 on Air India for "insufficient oxygen on board" during some international flights.
Dubai Eye
an hour ago
- Dubai Eye
Ukraine asks allies to allocate 0.25% of GDP to boost its weapon production
President Volodymyr Zelenskyy has called on Ukraine's Western partners to allocate 0.25 per cent of their GDP to helping Kyiv ramp up weapons production and said the country plans to sign agreements this summer to start exporting weapon production technologies. In remarks released for publication by his office on Saturday, Zelenskyy said Ukraine was in talks with Denmark, Norway, Germany, Canada, the United Kingdom and Lithuania to launch joint weapon production. "Ukraine is part of Europe's security and we want 0.25% of the GDP of a particular partner country to be allocated for our defence industry and domestic production," Zelenskyy said. As the war with a bigger and better-equipped Russia has intensified in recent weeks, Ukraine's need for new weapons and ammunition is constantly growing. This year Kyiv had secured $43 billion to finance its domestic weapon production, Zelenskyy said. Member nations of the NATO military alliance are expected to meet next week in The Hague, to discuss higher defence spending. NATO Secretary General Mark Rutte has proposed that countries should each agree to spend 5 per cent of their GDP on defence and security measures. Zelenskyy said he was likely to visit the NATO summit, adding that several meetings with Western leaders had been set up on the sidelines. He also said that he hoped to meet US President Donald Trump. Last week, Zelenskyy attended the Group of Seven summit in Canada as he sought to discuss stronger sanctions against Russia and more military support for Ukraine with Trump there. But he failed to meet with the US President as Trump left a day early for Washington to address the Israel-Iran conflict. Ukraine currently covers about 40 per cent of its defence needs with domestic production, and the government is constantly looking for ways to increase production further. Kyiv plans to launch joint weapon production outside of the country and will start exporting some of its military production technologies, Zelenskyy said. "We have launched a programme 'Build with Ukraine' and in summer we will sign relevant agreements to start exporting our technologies abroad in the format of opening production lines in European countries," Zelenskyy said. The discussions focused on producing different types of drones, missiles, and potentially artillery, he added.
Al Etihad
an hour ago
- Al Etihad
Investors brace for oil price spike, rush to havens after US bombs Iran nuclear sites
22 June 2025 05:46 NEW YORK (Reuters) A US attack on Iranian nuclear sites on Saturday could lead to a knee-jerk reaction in global markets when they reopen, sending oil prices higher and triggering a rush to safety, investors said, as they assessed how the latest escalation of tensions would ripple through the global attack, which was announced by President Donald Trump on social media site Truth Social, deepens US involvement in the Middle East conflict. That was the question going into the weekend, when investors were mulling a host of different market scenarios. In the immediate aftermath of the announcement, they expected the US involvement was likely to cause a selloff in equities and a possible bid for the dollar and other safe-haven assets when trading begins, but also said much uncertainty about the course of the conflict Trump called the attack "successful", few details were known. He was expected to address the nation later today."I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River however, said there was time to digest the news before markets open and said he was making arrangements to talk to other market participants. OIL PRICES, INFLATION A key concern for markets would center around the potential impact of the developments in the Middle East on oil prices and thus on inflation. A rise in inflation could dampen consumer confidence and lessen the chance of near-term interest rate global benchmark Brent crude futures have risen as much as 18% since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June average, the S&P 500 slipped 0.3% in the three weeks following the start of conflict, but was 2.3% higher on average two months following the conflict, according to data from Wedbush Securities and CapIQ Pro. DOLLAR WOES An escalation in the conflict could have mixed implications for the US dollar, which has tumbled this year amid worries over diminished US the event of US direct engagement in the Iran-Israel war, the dollar could initially benefit from a safety bid, analysts said. Stock Markets Continue full coverage
