Dollar poised for second weekly gain with no end in sight for Iran war

TOKYO: The dollar held gains on Friday and was set for its second weekly gain since the beginning of the war in Iran as turmoil in markets left it the last safe-haven standing.

The euro traded near its weakest since November while the yen was at levels that put traders on guard for possible intervention by authorities in Japan.

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, thanks in part to its safe-haven appeal, but also because the United States is a net energy exporter.

The index fell 0.04% to 99.63 in early trading in Asia, poised for a 0.8% gain this week.

The euro was up 0.13% at $1.1525.

The yen strengthened 0.17% to 159.08 per dollar after touching 159.43 on Thursday, the weakest since January 14. Sterling was up 0.11% to $1.3356.

The US on Thursday issued a new Russia-related general license that allows the sale of Russian crude oil and petroleum products loaded on vessels through April 11, according to the Treasury Department website. The Trump administration has burned through “years” of critical munitions since the start of the war, the Financial Times reported.

And in Western Iraq, the US is carrying out rescue efforts after a military refueling aircraft crashed, in an incident US Central Command said was not the result of hostile or friendly fire.

The IEA on Wednesday agreed to release a record 400 million barrels of oil from strategic stockpiles, which would cover only about 20 days of supply lost due to the disruptions along the Strait of Hormuz, and will take weeks or months to reach markets.

Investors are also focused on next week’s meetings at the Federal Reserve and the European Central Bank to gauge how policymakers will react to the prospect of an energy-price shock.

The swaps market on Thursday showed that traders expect the European Central Bank to raise rates possibly as soon as June, while the US Federal Reserve could leave it until September before cutting rates, from a previous expectation for July, according to data compiled by LSEG.

The Australian dollar strengthened 0.14% versus the greenback to $0.7084, while New Zealand’s kiwi edged up 0.05% to $0.5858. In cryptocurrencies, bitcoin gained 1.81% to $71,464.23, as ether rose 2.48% to $2,114.22.