Dollar and Yen Strengthen Amid Middle East Unrest
Dollar and Yen Gain on Flight to Safety
The safe-haven dollar and Japanese yen edged higher on Monday as violence in the Middle East spooked markets, while a blowout U.S. jobs report gave the greenback a further boost. The risk-sensitive Australian and New Zealand dollars, on the other hand, fell in thinned Asian trade, with Japan closed for a holiday.
Yen Rises Against the Euro
Against the euro, the yen rose more than 0.3% to 157.55, while it fell roughly 0.7% at one point to hit a session-low of 94.84 yen. The Japanese currency last bought 149.19 per dollar.
Israel-Palestine Conflict Fuels Uncertainty
Risk sentiment was fragile after Israeli forces clashed with gunmen from the Palestinian group Hamas over the weekend, resulting in the deadliest day of violence in the country in 50 years. This uncertainty has led to market instability, with analysts predicting continued support for the dollar and yen.
Euro and Pound Weaken Against the Dollar
Against the dollar, the euro fell 0.2% to $1.0565, while sterling slipped 0.1% to $1.2218. The yen, meanwhile, remained 0.11% higher at 106.21, drawing additional support from robust U.S. employment data that may indicate a higher-than-expected inflation rate later in the week.
Rate Hike Possibility and Fed’s Outlook
The strong employment report may prompt the Federal Open Market Committee (FOMC) to closely monitor signs of a tight labor market impacting inflation. While the possibility of another rate hike before the end of the year remains, economists at Wells Fargo believe the last rate hike occurred in July.
Asian Markets and China’s Forex Reserves
In Asia, China returns from its Golden Week holiday. The country’s foreign exchange reserves fell more than expected in September, according to official data. The yuan dipped slightly to last trade at 7.3123 per dollar.
While markets remain uncertain due to the Israel-Palestine conflict, the dollar and yen have benefited from their safe-haven status. As geopolitical tensions continue to unfold, investors will closely monitor developments in the Middle East and their impact on global markets.
