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Israel expands war targets on border with Lebanon

Israel said on Tuesday that halting Hezbollah attacks in the country’s north to allow thousands of residents to return to their homes is now an official war objective as it believes a wider military operation in Lebanon could trigger an all-out conflict, according to the AP News.

Israeli leaders have often vowed to take more military action to stop the near-daily attacks, which began shortly after the nearly year-long Israel-Hamas war broke out in Gaza. Israel has carried out many air strikes on Lebanon, targeting and killing prominent Hezbollah leaders.

Market reaction

At press time, gold was up 0.19% on the day at $2,575.

Frequently asked questions about sense of risk

In the world of financial jargon, the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to bear during the reference period. In a risky market, investors are optimistic about the future and more willing to buy risky assets. In a “de-risking” market, investors begin to “play it safe” because they are worried about the future and therefore buy less risky assets that are more certain to yield a return, even if it is relatively modest .

Typically during “risk on” periods, stock markets will rise, most commodities – except gold – will also gain in value as they benefit from a positive growth outlook. Currencies of nations that are large commodity exporters are strengthening due to increased demand and Cryptocurrencies are rising. In a “risk-off” market, Bonds rise – especially major government bonds – gold shines, and safe-haven currencies such as the Japanese yen, Swiss franc and US dollar all benefit.

The Australian dollar (AUD), Canadian dollar (CAD), New Zealand dollar (NZD) and minor currencies such as the ruble (RUB) and South African rand (ZAR) all tend to rise in markets that are “risk-on” .This is because the economies of these currencies depend heavily on commodity exports for growth, and commodities tend to rise in price during risky periods.This is because investors anticipate higher demand for commodities in the future, due to intensified economic activity.

The main currencies that tend to rise during “risk-off” periods are the US dollar (USD), the Japanese yen (JPY) and the Swiss franc (CHF). The US dollar, because it is the world’s reserve currency and because in times of crisis investors buy US government debt, which is seen as safe because the world’s largest economy is unlikely to default. The yen, due to increased demand for Japanese government bonds, as a large proportion are held by domestic investors, who are unlikely to withdraw them – even in a crisis. The Swiss franc, as strict Swiss banking laws provide investors with increased capital protection.

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