* Japanese yen rises to 3-month high vs dollar
* Swiss franc close to 4-month high vs euro
* Oil currencies not impacted yet despite oil price spike
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Adds detail on vol, new quote and chart and updates prices)
By Olga Cotaga
LONDON, Jan 6 (Reuters) - The yen and other safe-haven
currencies were in demand on Monday, along with assets such as
gold, as investors fretted that the killing of Iran's most
prominent military commander by the United States could trigger
a broader Middle East conflict.
The moves extended a flight to safety that began on Friday
after Iranian Major-General Qassem Soleimani was killed in a
U.S. drone strike on his convoy at Baghdad airport.
U.S. President Donald Trump warned of a "major retaliation"
if Iran hit back, while Iran's replacement commander vowed to
expel the United States from the region. On Sunday, Iran further distanced itself from the 2015
nuclear agreement with world powers, which the United States
withdrew from in 2018, saying it would continue to cooperate
with the U.N. nuclear watchdog but would respect no limits to
its uranium enrichment work. The Japanese yen surged on Monday to a three-month high of
107.77 versus the U.S. dollar in Asian trading and was last up
0.2% on the day just below 108 JPY=EBS .
Spot gold was 1.6% higher XAU= , at an almost seven-year
high, and oil rose on fears that any conflict in the region
could disrupt global supplies. O/R
The Swiss franc, another safe currency, was trading flat
too, though close to the four-month high of 1.0824 it reached
against the euro on Friday EURCHF=EBS .
Implied volatility gauges in euro/dollar, the most traded
currency pair, on the other hand, were relatively calm,
suggesting investors are not yet fleeing to add protection to
their portfolios by buying currency options.
A currency volatility index developed by Deutsche Bank was
only marginally up and still close to its lowest levels on
record. .DBCVIX
Currencies sensitive to global risk appetite were weaker,
including the Australian dollar, New Zealand dollar and Swedish
crown.
"Iran is almost certainly to respond in some scale, scope
and magnitude," said Lee Hardman, currency analyst at MUFG.
Therefore "market participants are likely to remain nervous
until there is more clarity over how geopolitical tensions
between the U.S. and Iran will proceed," Hardman said, noting
that geopolitical tensions could hurt global economic growth,
especially if the price of oil increases.
So far, however, oil-related currencies such as the Canadian
dollar, Norwegian crown and Russian rouble have not yet
strengthened even though Brent crude continued last week's rise
and topped $70 on Monday for the first time since September.
The dollar was 0.2% lower against six major currencies
.DXY and down 0.4% against the euro at $1.1196 EUR=EBS .
Jane Foley, senior currency strategist at Rabobank, said the
dollar might be losing out on the back of other safe-haven
currencies rising.
The dollar is sometimes seen as a safe-haven asset given
most central banks hold it as their main reserve currency and a
big chunk of global companies trade using dollars, but the yen
and the franc represent a more traditional safe-haven bet.
Foley expects the greenback to weaken during the course of
2020.
Elsewhere, the British pound was trading up 0.7% at $1.3160
GBP=D3 and up 0.4% at 85.04 pence against the euro EURGBP=D3
ahead of a crucial week when British lawmakers are due to
reconvene to debate the EU divorce deal Prime Minister Boris
Johnson has agreed with Brussels.
Currency volatility index close to record lows https://tmsnrt.rs/2SSaogq
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