MIDDLE EAST – The Japanese yen and the Swiss franc strengthened as tensions between the United States and Iran threaten to boil over. Other safe-haven currencies and assets like gold were also sought after by investors.
Both the Japanese Yen (JPY) and the Swiss franc (CHf) hit record highs today. The former rose to a three-month high against the US dollar (USD). Meanwhile, the franc closed on a four-month high versus the euro.
The yen skyrocketed to 107.77 versus the dollar in the Asian market. The JPY ended the day with a gain of 0.2% and settled at 108. Traders are still pushing to sell any upside rallies in the USD/JPY pair.
The market outlook for the pair is unsurprisingly bearish given the ongoing geopolitical issues. This hints that the pair will further slide down. The downside targets for a bearish USD/JPY are lurking around the 107.50 and 107.10 levels. The currency pair will become bullish if it trades above the 108.20 area, with a key resistance around the 108.40 and 108.70 levels.
Another safe-haven counterpart, the franc, was flat during the trading day. But it was close to its peak of 1.0824, which it had accomplished against the euro last Friday.
The dollar was just floating in place against the six major currencies. It was weak against the euro, with the EUR/USD pair previously up by 0.1% at $1.1167.
On a positive note, the implied volatility measures for the commonly traded currency pairs were quite calm. It implies that investors are not yet running to enhance portfolios by purchasing currency options.
Gold and oil also grew stronger today as demands for these safe-haven assets continued. Spot gold was up by 1.4% to hit close to a seven-year high. Oil prices were also up as traders worried that global supplies could become disrupted if fighting breaks out in the Middle East.
The demand for safe-haven currencies like the yen and franc were an expected response as investors scramble to secure their assets.
Iran vowed to retaliate for the killing of its top military commander. The country has also stated that while they will keep cooperating with the United Nations, it will no longer adhere to the limitations imposed on its uranium enrichment program.
Meanwhile, US President Donald Trump has stated there will be a “major retaliation” if Iran acts against America.
MUFG currency analyst Lee Hardman says that with Iran expected to “respond in some scale, scope, and magnitude,” the market will continue to be volatile until it’s clear how the issue between the US and Iran will progress.