Dollar Edges Higher Ahead of Weekend, Markets Wary of Middle East Risks!
The US dollar edged higher against major G10 currencies on Friday, as investors weighed the risk of escalating Middle East conflicts over the weekend. The Bloomberg Dollar Spot Index rose 0.1% and was on track to post a weekly gain of around 0.6%, its first weekly gain this month.
Market sentiment remained defensive as US-Iran tensions escalated in the Strait of Hormuz, with both sides maintaining a blockade that effectively closed the oil and gas transit route for the eighth week. These geopolitical risks kept demand for safe-haven assets, including the dollar, active, although the market has not yet seen a major sell-off in riskier assets.
The prospect of Iran agreeing to additional face-to-face talks with the US is also seen as hampered by Trump's threats and aggressive social media posts, according to officials familiar with diplomatic efforts. On the market side, this has led market participants to place more weight on headline risks, which can change rapidly, especially as the week draws to a close.
Richard Franulovich, head of foreign exchange strategy at Westpac in Sydney, said behind-the-scenes communication channels remain calm, but there's a sense that "contained tensions" could easily spiral out of control. He also cautioned against major news patterns that often emerge over the weekend and trigger gaps at the Asian open on Monday, potentially giving the dollar the potential to remain strong heading into the weekend.
Meanwhile, other market indicators were relatively stable. The 2-year US Treasury yield was barely changed at 3.84%, and S&P 500 futures were flat, suggesting the market is absorbing risk without extreme position swings, even though Brent prices have returned above $105.
In the currency market, AUD/USD fell 0.1% to 0.7122 and NZD/USD fell 0.1% to 0.5850, while USD/JPY remained relatively stable at 159.77 and EUR/USD was flat at 1.1679. Japanese Finance Minister Satsuki Katayama said authorities will take "firm and strong" action against speculative movements in the foreign exchange market, highlighting significant movements partly linked to oil price dynamics. (asd)
Source: Newsmaker.id*
