Dollar Gains as War Drives Investors to Safe-Haven Assets
The US dollar rose on Friday, March 13, heading for its second consecutive weekly gain after the war in the Middle East drove investors toward safe-haven assets and put pressure on energy-sensitive currencies like the euro.
President Donald Trump said the United States would launch powerful strikes against Iran "next week," shortly after issuing a partial 30-day waiver on the purchase of sanctioned Russian oil in hopes of easing prices fueled by the US-Israeli war on Iran.
A sharp and prolonged rise in oil prices would severely damage the economies of Japan and the Eurozone, which are heavily reliant on crude oil imports, while the United States would be relatively insulated from the impact, having been a net exporter of crude oil for nearly a decade.
“Global investors are reducing their overseas investments, pushing money into safe havens and penalizing the currencies of net energy importers,” said Carl Chamota, a strategist at Corby.
The euro fell 0.6% against the dollar to $1.14395. The dollar index, which measures the greenback against a basket of currencies, rose 0.7% to 100.35. The index gained 1.5% for the week.
However, Chamota cautioned that foreign exchange markets face mutual risks.
“With the war continuing, both Tehran and Washington have strong incentives to return to the negotiating table, and there are good reasons to believe a face-saving agreement could be reached as soon as possible, perhaps as early as this weekend,” Chamota said.
Data released on Friday showed that U.S. consumer spending rose slightly more than expected in January, which, along with persistently strong core inflation and the ongoing war in the Middle East, reinforced economists' views that the Federal Reserve will not resume cutting interest rates for some time.
Investors are awaiting the European Central Bank's monetary policy meeting next Thursday, while traders expect rising oil prices to prompt the central bank to raise interest rates this year.
The dollar rose against the Japanese yen to its highest level since July 2024, last trading up 0.2% at 159.67 yen.
Japanese Finance Minister Satsuki Katayama announced on Friday that Japan is prepared to take necessary measures to counter yen movements that affect citizens' lives, adding that she is in close contact with U.S. authorities on foreign exchange issues.
In the cryptocurrency sector, Bitcoin rose 1.2% to $71,021, after hitting a nine-day high earlier in the session.
