The dollar firmed against major currencies on Monday, driven by safe-haven buying from investors fearing the Israel-Iran fighting could escalate into a broader regional conflict as they braced for a week packed with central bank meetings.
As both Iran and Israel showed no signs of backing off from their attacks, the prospect that Tehran might seek to choke off the Strait of Hormuz – the world’s most important gateway for oil shipping – raised broader economic risks from disruptions in the energy rich Middle East.
Scheduled weekend talks between Iran and the United States on Tehran’s nuclear programme were also shelved after Israel launched its surprise attack on Friday.
On Monday, the dollar rose 0.14 percent to 144.3 Japanese yen, while the euro was 0.14 percent lower at $1.1534.
In early Asia hours, the greenback was steady against the Swiss franc at 0.81, while an index that measures the dollar against six others was steady at 98.25.
Currencies that are positively correlated to risk such as the Australian dollar and the New Zealand Dollar were marginally higher.
“The dollar’s role as a safe haven will surely be tested, and recent price action has been inconclusive,” said Win Thin, global head of markets strategy at Brown Brothers Harriman.
“If the Fed delivers a dovish hold as we expect, the dollar is likely to resume weakening due to the worsening fundamental backdrop in the US”
Geopolitical tensions were the latest twist for investors and central bank policymakers who have been trying to navigate economic uncertainty triggered by US President Donald Trump’s move to reshape the global trade order this year.
