Market turmoil drives the dollar higher as investors seek safety
On Friday, the dollar climbed to a three-month peak and was on track for its second consecutive weekly gain since the onset of the war in Iran, as market instability made it the last remaining safe-haven asset.
The euro fell to its lowest level since November, and Japan warned that it was ready to take action to protect against declines in the yen, which touched its weakest point in 20 months, News.Az reports, citing foreign media.
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With oil prices surging, the US permitted the sale of some Russian petroleum products that had been sanctioned due to Moscow’s hostilities in Ukraine. Iran stepped up attacks on oil and transport facilities across the Middle East as its new Supreme Leader Mojtaba Khamenei vowed to keep the Strait of Hormuz shipping lane closed.
“For the moment now, the market has got a new focus. It’s not diversification, it’s inflation, and it’s lower growth,” Gavin Friend, senior markets strategist at National Australia Bank in London, said on a podcast. “It’s the mix, the toxic mix, of higher inflation and lower growth that will come the longer this whole crisis stays with us.”
The dollar index, which measures the greenback against a basket of currencies, reached the highest level since November 26, thanks in part to its safe-haven appeal, but also because the United States is a net energy exporter.
The index rose 0.16% to 99.83, poised for a 1% gain this week. The euro slid 0.08% to $1.1501, a level not seen since November 21.
The yen slid to 159.69 per dollar, the weakest since July 2024. Sterling fell 0.08% to $1.333.
When the yen weakened toward the critical 160 per dollar level in January, the US conducted so-called rate checks that often presage intervention, helping drive a rally in Japan’s currency.
As a major energy importer, Japan faces a double whammy from the Middle East crisis due to rising energy costs and diminished safe-haven appeal for the yen, according to IG Markets analyst Tony Sycamore.
The surge in energy prices triggered by the conflict in the Middle East has significantly strengthened the dollar, paradoxically undermining US President Donald Trump’s economic objectives.
By Ulviyya Salmanli
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