Markets News

FOREX-Yen, Swiss franc rise on U.S.-Iran tensions

    * Japanese yen rises to 3-month high vs dollar
    * Oil currencies not impacted yet despite oil price spike
    * Markets in wait-and-see mode on next U.S., Iran move
    * Graphic: World FX rates in 2019

 (Adds new comment, FX table, updates prices, changes byline, dateline, previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 6 (Reuters) - The safe-haven yen and Swiss franc rose against the dollar on Monday on
worries about a broader escalation of conflict in the Middle East after the United States killed Iran's
most prominent military commander.
    The moves extended a flight to safety that began on Friday after Iranian Major-General Qassem
Soleimani was killed in a U.S. drone strike on his convoy at Baghdad airport.
    U.S. President Donald Trump warned of a "major retaliation" if Iran hit back, while Iran's replacement
commander vowed to expel the United States from the region.
    "The market is still digesting the implications of the Iran situation," said Edward Moya, senior
market analyst at OANDA in New York. "We're having a little softness in the dollar against safe-haven
currencies, but I think risk appetite will return. If Iran does retaliate, they know they're toast." 
    On Sunday, Iran further distanced itself from the 2015 nuclear agreement with world powers, which the
United States withdrew from in 2018, saying it would continue to cooperate with the U.N. nuclear watchdog
but would respect no limits to its uranium enrichment work.
    The yen surged on Monday to a three-month high around 107.75 versus the U.S. dollar, which was last
trading slightly down at 108.13 yen.
    The Swiss franc, another safe-haven currency, rose against the dollar, which fell 0.2% to 0.9701 franc
    The dollar index was down 0.1% at 96.714.    
    The greenback is sometimes seen as a safe-haven asset given that most central banks hold it as their
main reserve currency and a big chunk of global companies trade using dollars, but the yen and the franc
represent a more traditional safe-haven bet.    
    Implied volatility gauges in euro/dollar, the most traded currency pair, on the other hand, were
relatively calm, suggesting investors are not yet fleeing to add protection to their portfolios by buying
currency options.
    A currency volatility index developed by Deutsche Bank was only marginally up and still close to its
lowest levels on record.
    Currencies sensitive to global risk appetite were weaker, including the Australian dollar, New Zealand
dollar and Swedish crown.
    "Iran is almost certainly to respond in some scale, scope and magnitude," said Lee Hardman, currency
analyst at MUFG. 
    Therefore "market participants are likely to remain nervous until there is more clarity over how
geopolitical tensions between the U.S. and Iran will proceed," Hardman said, noting that geopolitical
tensions could hurt global economic growth, especially if the price of oil increases.
    Elsewhere, the British pound was trading up 0.5% at $1.3144 ahead of a crucial week when
British lawmakers are due to reconvene to debate the Brexit deal Prime Minister Boris Johnson has agreed
with Brussels.
    Currency bid prices at 10:19 AM (1519 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1184        $1.1158     +0.23%         -0.23%      +1.1206     +1.1157
 Dollar/Yen       JPY=        108.1200       108.0800    +0.04%         -0.68%      +108.1700   +107.7800
 Euro/Yen         EURJPY=     120.94         120.60      +0.28%         -0.83%      +121.1300   +120.2900
 Dollar/Swiss     CHF=        0.9703         0.9725      -0.23%         +0.26%      +0.9717     +0.9685
 Sterling/Dollar  GBP=        1.3147         1.3086      +0.47%         -0.84%      +1.3174     +1.3065
 Dollar/Canadian  CAD=        1.2976         1.2999      -0.18%         -0.08%      +1.2990     +1.2965
 Australian/Doll  AUD=        0.6927         0.6951      -0.35%         -1.34%      +0.6957     +0.6926
 Euro/Swiss       EURCHF=     1.0853         1.0846      +0.06%         +0.01%      +1.0859     +1.0833
 Euro/Sterling    EURGBP=     0.8505         0.8530      -0.29%         +0.60%      +0.8545     +0.8501
 NZ               NZD=        0.6660         0.6663      -0.05%         -1.13%      +0.6680     +0.6645
 Dollar/Norway    NOK=        8.8116         8.8384      -0.30%         +0.38%      +8.8545     +8.7869
 Euro/Norway      EURNOK=     9.8546         9.8615      -0.07%         +0.18%      +9.8835     +9.8427
 Dollar/Sweden    SEK=        9.4224         9.3961      +0.47%         +0.80%      +9.4353     +9.3888
 Euro/Sweden      EURSEK=     10.5380        10.4885     +0.47%         +0.66%      +10.5430    +10.4871
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Olga Kotaga in London
Editing by Paul Simao)