The safe-haven yen fell to two-week lows against the dollar on Thursday as the United States and Iran moved away from an all-out conflict, prompting investors to take on more risky assets and focus more on an upcoming US-China trade deal.
US President Donald Trump responded to an Iranian attack on US forces with sanctions, not violence. Iran offered no immediate signal it would retaliate further against a Jan. 3 US drone strike that killed its senior military commander.
The yen, seen as a safe haven in times of geopolitical turmoil because of its deep liquidity and Japan's current account surplus, reversed the gains it made against the dollar after Iran's missile strike. The dollar was last up 0.3% at 109.48 yen, after earlier hitting 109.57 yen, its highest since Dec. 27.
"Markets are taking comfort from a cooling in US-Iran tensions after conciliatory words from President Trump," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "The Mideast crisis going from a boil to a simmer allowed bullish US fundamentals to return to the surface."
Gold prices also slid, retreating further from a near-seven-year peak scaled in the previous session.
Implied volatility gauges for euro/dollar are falling back toward late 2019 lows, which is "very telling," according to Reuters analysts.
Three-month implied volatility in euro/dollar fell to 4.27% at the end of November, its lowest level on record.
In other currencies, China's yuan rose to a five-month high of 6.9175 against the dollar overnight in the offshore market, boosted by a steady inflation readout.
In midday trading, the dollar index was 0.2% higher on the day at 97.458.
The Swiss franc though remained slightly elevated against the dollar, which slipped 0.2% to 0.9721.
Comments
Comments are closed.