Dollar advances as investors brace for Iran response to US attacks
The U.S. dollar firmed on Monday as nervy investors sought safety, although the restrained moves suggest markets were waiting for Iran's response to U.S. attacks on its nuclear sites that have exacerbated conflict in the Middle East.
Iran said on Monday that the U.S. attack on its nuclear sites expanded the range of legitimate targets for its armed forces and called U.S. President Donald Trump a "gambler" for joining Israel's military campaign against the Islamic Republic.
The major moves were in the oil market, with crude prices hitting a five-month high, before dipping to trade lower on the day.
The dollar firmed 1% against the yen and was last at 147.450, at its highest level since May 15.
Bank of America strategists said dollar/yen can reprice higher if oil prices remain elevated, noting Japan imports almost all of its petroleum, more than 90% of which comes from the Middle East, while the U.S. is largely energy-independent.
The euro fared better, just 0.2% lower at $1.14965 and unchanged after Euro area flash PMIs showed the region's economy flatlined for a second month in June.
Slightly improving UK flash PMIs also hit screens but didn't move the dial on sterling, which last fetched $1.34385, just 0.1% lower against the dollar.
Meanwhile, the Australian dollar, often seen as a risk proxy, hit a one-month low and was last 0.52% weaker at $0.64180, while the New Zealand dollar sank 0.68% to $0.5926.
That left the dollar index, which measures the U.S. currency against six other units, 0.15% higher at 99.065.
Carol Kong, currency strategist at Commonwealth Bank of Australia, said the markets are in wait-and-see mode on how Iran responds, with more worries about the positive inflationary impact of the conflict than the negative economic impact.
"The currency markets will be at the mercy of comments and actions from the Iranian, Israeli and U.S. governments," Kong said. "The risks are clearly skewed to further upside in the safe haven currencies if the parties escalate the conflict."
Source: Reuters
