NEW YORK: The US dollar rose broadly on Monday as surging oil prices, driven by the US-Israeli war on Iran, pushed investors toward the safety of the greenback on fears a protracted conflict could disrupt global energy supplies and weigh on economic growth.
The euro was last down 0.5 percent to USD1.1564, after earlier touching a more than three-month low of USD1.1505. The dollar was up 0.3 percent against the Japanese yen to a six-week peak, while sterling was 0.5 percent lower against the US currency.
“Ultimately the US dollar always plays well as a safe haven in a world of chaos,” said Juan Perez, director of trading at Monex USA.
“It also tends to win when the United States shows any type of military strength,” he said.
Stocks, bonds and precious metals slid as investors worried about the impact of surging oil prices on global inflation and economic growth. Iran on Monday named Mojtaba Khamenei to succeed his father as supreme leader, signaling that hardliners remain firmly in charge in Tehran a week into the war.
The dollar pared some gains after a Financial Times report said G7 finance ministers will discuss on Monday a joint release of oil from emergency reserves coordinated by the International Energy Agency.
The report saw oil prices trim gains after they earlier spiked to just shy of USD120 per barrel. Brent crude was last up 10 percent at USD102.99 a barrel, after earlier surging more than 25 percent.
Monex’s Perez, however, warned that the dollar’s new-found strength was not on a solid footing and could come under pressure should the conflict in Iran be resolved quickly.
“This war is not happening in the midst of a good economic situation for the United States. It’s actually happening at a moment when the economic situation is in doubt,” Perez said.
“The moment there is any quick resolution … it’s going to hurt the dollar big time,” he said.
Surprisingly weak US jobs data on Friday briefly stalled dollar gains and raised expectations for US rate cuts, but that had faded by Monday.
Traders were last betting on around 35 basis points worth of Federal Reserve easing by the end of the year, having priced in more than 55 basis points in late February.
The Canadian dollar held steady against the greenback, finding support from rising oil prices. Canada is a major oil exporter, and higher crude prices tend to bolster both its economy and government revenues.
Analysts have said Asia could bear the brunt of the energy price shock, due to the region’s heavy reliance on oil and gas from the Middle East, while Britain and the euro zone are also heavily exposed.
The dollar was close to the 159 yen level on Monday.
Leading cryptocurrency bitcoin rose 3 percent to USD69,117, but remained close to the multi-year low touched in early February.
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