The yen and Swiss franc climbed after President Barack Obama authorized targeted air strikes in Iraq, adding to the allure of haven assets amid geopolitical conflicts in Ukraine and across the Middle East.
The yen rose to the strongest since November against the euro before the Bank of Japan governor speaks today and after Ukraine’s government said pro-Russian separatists downed a fighter jet. The greenback was near its strongest in almost six months versus a basket of major peers and 10-year Treasuries climbed, sending yields to the lowest since June 2013. The New Zealand and Australian dollars fell with Turkey’s lira. Currency volatility rose to a two-month high.
“We’re seeing Treasuries rally and a bit of risk aversion through markets at the moment,” said Greg Gibbs, the Singapore-based head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc. “Euro-yen and dollar-yen are both coming under some additional pressure.”
The yen rose 0.3 percent to 101.74 per dollar as of 7:03 a.m. in London and touched 101.60, the strongest since July 24. It advanced 0.4 percent to 135.96 per euro. The U.S. currency traded at $1.3361 per euro from $1.3364 in New York. The franc gained 0.1 percent to 90.80 centimes per dollar.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, was little changed at 1,022.53. It was set for a fourth weekly gain, the longest run since the period ended March 8, 2013.
JPMorgan Chase & Co.’s Global FX Volatility Index rose to 6.34 percent, set for its highest close since June 4. That’s up from an all-time low on a closing basis of 5.29 percent on July 3.
“Geopolitical tensions are the market’s main focus, fueling a flight to quality,” said Yasuhiro Kaizaki, a vice president for global markets in New York at Sumitomo Mitsui Trust Bank. “In that risk-off environment, high-yield currencies are being sold in favor of the dollar and yen.”
The Turkish lira tumbled 0.6 percent to 2.1793 per dollar – – the second-biggest decline among 31 major peers — after reaching 2.1834, the weakest since March 31.
The Aussie fell 0.3 percent to 92.45 U.S. cents, after touching 92.39 U.S. cents, the lowest since June 3. The kiwi dropped 0.4 percent to 84.41 U.S. cents.
The Reserve Bank of Australia cut growth and inflation forecasts amid a steeper drop in mining investment and reiterated interest rates will remain on hold in its quarterly monetary policy statement today.
Australia’s currency briefly trimmed losses after China reported a record trade surplus as export growth unexpectedly accelerated. China is the South Pacific nation’s largest trading partner.
The BOJ today stuck to its pledge to increase the monetary base at an annual pace of 60 trillion yen ($590 billion) to 70 trillion yen. Governor Kuroda is scheduled to deliver a monetary policy statement at 3:30 p.m. Tokyo time.
To contact the editors responsible for this story: Garfield Reynolds at [email protected] Jonathan Annells