Safe Haven Shift; Dollar Crushes Yen and Euro in Biggest Monthly Gain Since July
The U.S. Dollar is closing March with its strongest gains since July, surging 2.8% as the ultimate safe haven amid soaring oil prices. While the Euro, Pound, and Yen have all plummeted over 2% this month, Asian currencies like the South Korean Won have hit lows not seen since the 2009 crisis.
- Republic Business
- 3 min read
The dollar headed for its biggest monthly gain since July on Tuesday and stands out as the strongest so-called safe asset, as war in the Middle East has set oil prices surging, nearly everything else sinking and raised the risk of global recession.
Developed market currencies were broadly steady on the day, with the Japanese yen unchanged at 159.62 per dollar, the euro flat at $1.1472 and the pound 0.14% higher at $1.3202.
But still all three were set for March falls of more than 2%. For the euro and pound, that is the largest drop since July, and since October for the yen.
The dollar has been supported by the U.S. status as an energy exporter and by investors' flight to cash over the past month of conflict.
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The latest news from the war, including a Wall Street Journal report that U.S. President Donald Trump was willing to end attacks on Iran without forcing open the Strait of Hormuz, did little for currencies on Tuesday, but did underscore their monthly moves.
"The lack of a clear plan to reopen the Strait continues to pose upside risks to global energy prices," said Lee Hardman, senior currency analyst at MUFG.
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"The potential for a bigger hit to growth outside of the U.S. continues to encourage a stronger U.S. dollar," he said.
Asian currencies have suffered some of the largest losses and, on Tuesday, the dollar pushed 1% higher against South Korea's won, to 1,534 won, levels touched only in the wake of the global financial crisis in 2009 and the Asian financial crisis in 1997 and 1998.
The dollar index, which tracks the unit against six main peers, touched its highest since last May at 100.64 and, last sitting at 100.47, is up 2.8% through March.
WATCHING THE YEN
Also top of mind for currency markets were renewed threats of intervention from Tokyo, which served to spare extra selling pressure on the yen, currently at its weakest since July 2024.
Finance Minister Satsuki Katayama on Tuesday repeated Tokyo's readiness to respond "on all fronts" against volatile moves, saying they were seeing "speculative moves heightening in the currency market," as well as in the oil futures market.
The dollar has stood tall since the war began over other perceived safe assets, not just the yen.
A looming inflation spike has hurt bonds. A positioning clearout has sunk gold, while the energy shock hurts Japan's terms of trade and Swiss authorities have indicated they would intervene to stem any steep gains for the franc.
The dollar is up nearly 4% for the month on the franc , at 0.80 francs, and has broken resistance levels for the Aussie and kiwi in recent sessions.
The Aussie has fallen for eight sessions and hit a two-month low of $0.6834, down 3.7% for March and under major support at $0.6897, while the kiwi, down six straight sessions, is on the verge of breaking below 57 cents.
The main risk to the dollar might come from labour data due out in the liquidity vacuum of Good Friday, or, warned strategists at Union Bancaire Privee, a breakdown in the relationship that usually sees the dollar higher if stocks fall.
"FX – equity correlations have been quite stable since the outbreak of the conflict, though this could change if markets move to price in a more prolonged conflict – with still uncertain outcomes," they said.
March inflation data is due later in the session in Europe and German data from Monday suggests it is likely to rip back above the European Central Bank's 2% target. (Reporting by Tom Westbrook in Singapore and Alun John in London; Editing by Lincoln Feast and Alex Richardson)