NEW YORK: The safe-haven yen and Swiss franc gained on Tuesday and riskier currencies like the Australian and New Zealand dollars fell as geopolitical tensions rose with Western countries poised to take military action against the Syrian government.
Economic reports such as an upbeat German business sentiment survey have largely been ignored with investors focused on conflict in the Middle East.
Western powers told the Syrian opposition to expect a strike against President Bashar al-Assad's forces within days, according to sources who attended a meeting between envoys and the Syrian National Coalition in Istanbul.
"Investors are unwinding carry trades as the growing risk of an international response to Syria drove all of the major currencies lower against the US dollar and Japanese yen," said Kathy Lien, managing director, at BK Asset Management in New York.
The Swiss franc and the yen usually climb in times of financial market stress and geopolitical uncertainty while growth-linked higher-yielding currencies are sold off.
In the case of the dollar, the greenback was bought against emerging market currencies.
The dollar extended losses to fall 1.3 percent versus the yen to 97.26 yen, pulling away from a near three-week high of 99.15 yen set on Friday. The euro also struggled against the yen, falling 1.1 percent to 130.20 yen.
The dollar fell 0.5 percent against the Swiss franc to 0.9184 franc, while the euro was down 0.4 percent at 1.2297 francs.
German, US and British government bond prices all rose as money flowed into safe-haven markets. Stocks were lower as were emerging market assets.
The growth-linked Australian dollar was down 0.8 percent at US$0.8963, while against the yen it lost nearly 2.0 percent to 87.20 yen. The New Zealand dollar fell 2.0 percent as well against the yen to 75.78 yen.
Washington said on Monday it believed Syrian President Bashar al-Assad was responsible for a chemical weapons attack on civilians last week in what US Secretary of State John Kerry called a "moral obscenity."
Emerging market currencies tumbled, with the Indian rupee hitting a record low and the Russian rouble, the Indonesian rupiah and a host of others recording multi-year troughs.
The rising tension stemming from Syria overshadowed the impact from positive data from the euro zone and United States.
The IFO German confidence survey showed business sentiment was at its highest level in 16 months but that had only a fleeting impact on the euro.
In the United States, consumer confidence improved this month, while home prices rose in June on a seasonally adjusted basis, according to the S&P/Case Shiller composite index of 20 metropolitan areas.
The euro was last up 0.2 perent against the dollar at $1.3387.
Disappointing US data in the past two trading sessions, including one which highlighted the fragility of the housing sector, have weighed on the dollar, although buying at lower levels has checked sharp losses.
The dollar index was last down 0.3 percent at 81.203.
Comments
Comments are closed for this article.