FOREX-Safe-haven yen, Swiss franc yo-yo after Iran strike on U.S. bases

Published 08/01/2020, 09:26
Updated 08/01/2020, 09:27
FOREX-Safe-haven yen, Swiss franc yo-yo after Iran strike on U.S. bases
XAU/USD
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* Iran launches missiles at US-led forces in Iraq

* Japan's yen jumps to 3-month high before retreating

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Dhara Ranasinghe

LONDON, Jan 8 (Reuters) - Currencies whipsawed on Wednesday,

with the safe-haven Japanese yen and Swiss franc initially

jumping after Iran fired rockets at U.S. forces in Iraq, before

they retreated on a perception that the strikes would not lead

to a wider regional conflict.

Iran said it had fired 15 missiles at U.S. targets in Iraq

early on Wednesday in retaliation for last week's U.S. drone

strike that killed Iranian commander Qassem Soleimani, stoking

fears of a new war in the Middle East. The Japanese yen initially jumped to three-month highs

against the dollar before retreating, with the absence of

immediate reports of casualties steadying nerves.

Twitter posts from both sides playing down the prospect of

further escalation also helped calm currency markets.

U.S. President Donald Trump tweeted that a damage assessment

was "So far, so good!" and said "all is well", promising a

further statement on Wednesday. Iranian Foreign Minister

Mohammad Javad Zarif tweeted that the attack was "proportionate"

and that "we do not seek escalation or war".

Iraq's military said there were no casualties among its

forces.

"News that Iran had launched ballistic missiles at two bases

that house U.S. troops in Iraq sparked an immediate sell-off in

risk," said Adam Cole, chief currency strategist at RBC Capital

Markets, referring to a fall in dollar/yen and a spike in crude

oil prices. O/R

"However, a growing sense that this will be the full extent

of Iranian retaliation has seen both moves fully reverse and G10

currencies are back to close to where they closed yesterday."

SAFE HAVENS

The yen, regarded as a haven in times of turmoil by virtue

of Japan's status as the world's biggest creditor, was virtually

unchanged on the day at 108.41 per dollar JPY=EBS .

That stabilisation followed a spike of as much as 0.8% to a

three-month high of 107.65 yen per dollar.

The Swiss franc CHF=EBS similarly gave back gains and so

did gold XAU= , by a lesser extent. GOL/

Switzerland's currency was steady at 0.9707 francs per

dollar, having briefly jumped around 0.4% to one-week highs.

The franc was also steady against the euro EURCHF=EBS .

"If the market was really worried that the end of the world

was nigh, dollar/yen would have collapsed, and that's clearly

not been the case," said Stuart Oakley, global head of flow FX

at Nomura in Singapore.

Investors' focus will now be on what response, if any, the

United States is planning.

Elsewhere, China's yuan CNH= , held on to most of Tuesday's

steep gains at 6.9460 per dollar, after a bumpy ride.

Against other major currencies, the dollar was mostly

steady, with the euro hovering around $1.1152 EUR=EBS .

The greenback had been buoyed on Tuesday by a strong showing

in a non-manufacturing business survey, released ahead of

Friday's key U.S. jobs report.

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