Dollar Falls as Traders Gauge Iranian Strikes
A Bloomberg gauge of the dollar closed near its session low as traders balanced reports of a retaliatory Iranian strike alongside a Federal Reserve official’s support for an interest-rate cut as soon as July.
The Bloomberg Dollar Spot Index closed down 0.3% near day’s low; earlier, rose as much as 0.6%.
Iran fired missiles at a US air base in Qatar in retaliation for President Donald Trump’s weekend attacks; Qatar said the barrage was intercepted.
“Markets seem to be digesting the latest flare-up of tensions with some ease,” said Shaun Osborne, chief currency strategist at Scotiabank. “The limited Iranian response and indications that the Qatari-bound missiles were intercepted without mishap perhaps infers very limited Iranian capacity to punch back at this point”.
“Should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market,” Federal Reserve Vice Chair for Supervision Michelle Bowman said Monday.
USD/JPY is little changed at 146.07, erasing all of day’s advance; yen still sees little benefit from haven flows even as Swiss franc gains.
One-week implied volatility in USD/JPY trades at 9.50%, versus 11.01% year-to-date average; the gauge fell Friday to 8.26%, the lowest since March.
USD/CHF down 0.7% to 0.8120 day’s low; CHF/JPY high of 180.88 is strongest on record in data compiled by Bloomberg going back to 1971.
“Among other reasons, the activation of some dollar safe haven flows is likely posing more of a challenge for the pairs with more concentrated structural short dollar positioning, which includes Asia low yielders,” wrote a Goldman Sachs team including Stuart Jenkins.
EUR/USD gains 0.5% to 1.1580, reversing earlier losses of as much as 0.6%.
The euro area’s private sector barely grew in June, remaining in limbo as erratic US trade policy and geopolitical conflicts leave companies in the dark on what’s next.
Source : Bloomberg
