· The Swiss franc held gains against the dollar on Tuesday as traders sought save-havens amid heightened anxiety about potential Iranian retaliation to a U.S. drone strike that killed its most prominent military commander.
The yen, another safe-haven currency, pulled back from a three-month high versus the dollar, but sentiment remains fragile due to the increasing worries about armed conflict between the United States and Iran.
“Sentiment clearly favors risk-off trades, but dollar/yen is not falling much because Japanese importers are buying,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.
“Excluding this real demand, the dollar is weak against other currencies. This reflects the situation in the Mid-East, but we need to see what happens next.”
Against the dollar, the Swiss franc CHF=EBS was quoted at 0.9693 following a 0.5% jump on Monday toward its highest level in more than a year.
The yen JPY=EBS was steady at 108.48 per dollar, off a three-month high of 107.77 touched on Monday.
The dollar index .DXY against a basket of six major currencies stood at 96.667, following a 0.2% decline on Monday.
Elsewhere in the currency market, the pound GDP=D3 traded at $1.3174, following a 0.7% jump on Monday. The euro EUR=D3 was quoted at $1.1192 after a 0.4% gain in the previous session.
· Karen Jones, analyst at Commerzbank, suggests that EUR/USD has seen a fairly robust recovery just ahead of the 20 day ma at 1.1095.
Key Quotes
“The market is well placed to retest resistance at 1.1197- 1.1240 – namely the 55 week ma, the 2019-2020 down channel and the recent high. This guards the 200 week ma at 1.1360 which continues to represent a critical break point medium term.”
“Dips lower are well supported by the 55 and 20 day ma at 1.1095/1.1065 and the 3 month uptrend at 1.1045.”
“Failure at the uptrend would target the 1.0981 29th November low.”
· The Global Times tweeted out this Tuesday, citing sources that "the China-US phase one trade deal is on track and could be signed in the near future”.
This comes despite the downbeat comments from China’s Vice Minister of Agriculture and Rural Affairs, Han Jun, on trade. Han said that China will not change its agricultural import quotas to accommodate any increased purchases from the US.
· In a note on Monday, Eurasia Group President Ian Bremmer and Chairman Cliff Kupchan outlined the consultancy’s top risks for 2020.
While they acknowledged that Iran was indeed a geopolitical risk, Bremmer and Kupchan claimed that “neither Trump nor Tehran wants all-out war.”
“Deadly skirmishes inside Iraq between U.S. and Iranian forces are likely,” the note added. “Iran will disrupt more tanker traffic in the Persian Gulf and hit the U.S. in cyberspace. It may also use its proxies in other Middle East countries to target U.S. citizens and U.S. allies.”
But Eurasia noted that media speculation around the escalating tensions had created a “red herring” relating to the risk posed by Tehran.
· Oil prices on Tuesday surrendered some gains made over the previous two days as investors reconsidered the likelihood of Middle East supply disruptions in the wake of the United States killing a top Iranian military commander.
Brent crude LCOc1 fell as much as 1.5% to $67.86 a barrel and was at $68.39, down 52 cents, at 0737 GMT. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $62.85, down 42 cents, after earlier dropping 1.5% to an intra-day low of $62.30.
“The market’s clearly worried about the potential for supply disruption but there’s no obvious path forward from here,” said Lachlan Shaw, head of commodity research at National Australia Bank.
“It’s all a matter of scenarios that may impact oil production or not, so the market seems to have recalibrated in the last 24 to 36 hours on some of those likelihoods.”
Reference: Reuters, FX Street, CNBC
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