Published 11:21 IST, April 19th 2024

Forex news: Risk aversion sweeps markets on Middle East tensions, Yen and Franc surge

Risk-sensitive currencies like the Australian and New Zealand Dollars plummeted to five-month lows.

Reported by: Business Desk
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Forex news: Financial markets experienced a wave of risk aversion on Friday, triggered by reports of an Israeli attack on Iran. This escalation in the Middle East conflict sent investors scrambling for safe-haven assets. News of the alleged attack sparked a selloff in riskier assets like stocks and a surge in demand for traditional safe havens like the Swiss Franc (CHF) and the Japanese Yen (JPY).

The Swiss Franc rose 0.35 per cent against the Dollar, reaching 0.9089 per Dollar, after an earlier jump of 1 per cent. Against the Euro, the Franc gained 0.4 per cent, climbing to 0.96685 Francs per Euro. The Japanese Yen appreciated by 0.2 per cent to 154.38 per Dollar, following a knee-jerk reaction of over 0.6 per cent to the initial attack reports.

Limited details regarding the attack and an Iranian denial of a missile strike caused some market movements to retrace. However, underlying anxieties persisted.

"Markets are nervous," said Moh Siong Sim, a currency strategist at Bank of Singapore. "We need to understand the degree of retaliation from Iran," he added.

Risk-sensitive currencies like the Australian and New Zealand Dollars plummeted to five-month lows. The Australian Dollar fell 0.3 per cent to $0.64015, while the New Zealand Dollar dropped 0.31 per cent to $0.58825. The US Dollar continued its rally on expectations of higher interest rates in the United States. This put pressure on Asian currencies, particularly the Korean won (KRW), which weakened past the 1,400 level to 1,382.90 per Dollar.

The potential for joint intervention by Asian nations to stabilise their currencies against the surging Dollar is rising. Bank of Japan Governor Kazuo Ueda hinted at the possibility of raising interest rates if the Yen's depreciation significantly impacts inflation.

The European Central Bank is expected to begin raising rates in June, further weakening the Euro (EUR) against the Dollar. Futures currently anticipate only 40 basis points of rate cuts from the US Federal Reserve this year, down from earlier expectations of 160 bps.

(With Reuters inputs.)


11:21 IST, April 19th 2024