THE safe-haven Swiss franc and Japanese yen pared gains on Friday (Apr 19) after Teheran signalled it has no plans to retaliate against Israel, which launched what has been described as a limited-scale attack on Iran overnight.
Both currencies jumped against their peers after news of Israel’s action, but their gains have slowed.
In afternoon trading, the dollar fell 0.2 per cent against the Swiss franc to 0.91 franc. It dropped as low as 0.9011 franc overnight, a roughly two-week low, following news of Israel’s move.
Against the yen, the dollar was last slightly down at 154.57 yen. The greenback slid as low as 153.59 yen after Israel’s news.
“The market initially reacted poorly because of the premise of an Israel response,” said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey.
“The question is: does this conflict drag out? At the moment, Iran’s response to Israel is interpreted as a de-escalation, for now. Therefore we have seen a reversal of pretty much everything.”
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Markets initially reacted sharply to the news of the latest Israel initiative, which sparked a sell-off in risk assets, caused oil and gold prices to jump, and ignited a rally in US Treasuries and safe-haven currencies.
The US dollar index, which tracks the currency against six major peers, also rose but gave up its gains to stand little changed on the day at 106.17.
Currencies bounced around throughout the European and North American sessions, with the euro initially falling, but was flat at US$1.0648 in late-afternoon trading. Sterling fell 0.5 per cent to US$1.2370.
The broad theme of the last few weeks has been a surging dollar on the back of a strong US economy. The euro has been down 1.3 per cent so far this month, while sterling has fallen 2 per cent.
Asian currencies have come under particular pressure, and finance chiefs in the United States, Japan and South Korea this week issued a rare trilateral warning over the two Asian nations’ sliding exchange rates, raising the prospect of a potential joint intervention.
Bank of Japan (BOJ) governor Kazuo Ueda said on Thursday the central bank may raise interest rates again if the yen’s declines significantly push up inflation, highlighting the impact currency moves may have on the timing of the next policy shift.
The BOJ will hold its monetary policy meeting next week. Data on Friday showed Japanese core inflation slowed to 2.6 per cent year on year in March, from 2.8 per cent, but remained above the central bank’s 2 per cent target.
Japanese Finance Minister Shunichi Suzuki on Friday have fresh warnings to speculators about pushing down the yen too much, noting that he would take appropriate action against excessive currency market moves.
In cryptocurrencies, bitcoin rose 1.1 per cent to US$64,287 ahead of the widely anticipated halving event either later on Friday or over the weekend. Bitcoin halving refers to a technical adjustment built into the digital currency’s code which reduces the rate at which new coins are created. REUTERS
