Dollar enjoys safe-haven status amid Middle East turmoil by Investing.com

Investing.com – The U.S. dollar edged higher on Wednesday, adding to steep gains in the previous session, as an Iranian missile attack on Israel escalated tensions in the volatile region.

At 03:45 ET (07:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1 percent higher at 100.969 after gaining about 0.5 % in the previous session, the biggest increase since September. 25.

The dollar for refuge is rising

Unrest in the Middle East escalated overnight, with Iran launching a barrage of ballistic missiles at Israel in retaliation for the recent killing of Iran-backed Hezbollah leader Hassan Nasrallah and Israel’s deployment of ground forces to southern Lebanon.

Iran has declared its attack over, barring further provocation, but Israel has vowed a response, potentially drawing its backer the United States into turmoil.

“The escalation in the Middle East has (to) price markets with a higher risk of a full-fledged conflict in the region that could involve the US,” analysts at ING said in a note.

The dollar also got a boost on Tuesday from a stronger-than-expected reading in the US, particularly ahead of Friday’s widely watched official monthly report.

“While ISM manufacturing was slightly weaker than expected and prices paid fell below 50.0, the Fed is focused on the labor market and the surprise rebound in August jobs adds to a bullish case for the longer term short for dollar. “, added ING.

The key economic release on Wednesday will be the September number.

Euro stabilizes after sales

In Europe, it traded mostly flat at 1.1067, after its biggest drop in nearly four months on Tuesday, following further signs of cooling inflation in the euro zone.

The region fell below the European Central Bank’s 2.0% target in September, and traders will watch comments from several ECB speakers, including the vice president and chief economist, for more guidance on the ECB’s future monetary policy.

Citigroup said in a note on Tuesday that it now expects the ECB to cut interest rates by 25 basis points at its Oct. 17 meeting and expects further cuts in December and through early 2025 to take the rate of monetary policy at 1.5. % until September 2025.

traded 0.1% higher at 1.3293, well below last week’s high of 1.3430, a level not seen since February 2022, this week being a quiet one in the UK economic data calendar.

Yen retreats on interest rate uncertainty

rose 0.3 percent to 144.06 after newly appointed Japanese Economy Minister Ryosei Akazawa said on Wednesday that Prime Minister Shigeru Ishiba expects the Bank of Japan to make careful economic assessments when it raises interest rates again .

The Bank of Japan’s July meeting, released earlier this week, also showed policymakers divided on how quickly the central bank should raise interest rates.

rose to 7.0185, yuan trading quiet with Chinese markets now closed until Tuesday next week when the country celebrates Golden Week.