SINGAPORE – The dollar firmed on Thursday, buoyed by safe-haven demand due to the looming threat of a broader conflict in the Middle East and possible US involvement, while investors weighed Federal Reserve Chair Jerome Powell’s cautionary tone on inflation.
After a muted start in Asia hours, the dollar advanced across the board, weighing heavily on risk sensitive currencies after a report said US officials are preparing for the possibility of a strike on Iran in the coming days.
The Australian dollar fell as much as 0.5 percent but was last down 0.3 percent at $0.6489, while the New Zealand dollar slipped 0.5 percent to $0.5998. Emerging market currencies also struggled, with the South Korean won 1 percent weaker.
Rapidly rising geopolitical tensions have led to the dollar swiftly reclaiming its safe-haven status, making inroads against the yen, euro and the Swiss franc.
Iran and Israel traded further air attacks on Thursday, with the conflict entering its seventh day. Concerns over potential U.S. involvement have also grown, as President Donald Trump kept the world guessing about whether the United States will join Israel’s bombardment of Iranian nuclear sites.
The conflict has heightened fears of broader regional instability, compounded by the spillover effects of the Gaza war.
Some analysts said investors were looking to cover their short-dollar positions.
“The dollar seems ripe for a short-covering rally – especially if the US wades into the Middle East conflict,” said Matt Simpson, a senior analyst at City Index.
