The dollar index, which tracks its performance against a basket of six other major currencies, fell 0.1% to 105.870, after reaching a high of 106.190, just below the five month maximums recorded at the beginning of the week at 106.51.
Dollar retreats after Israeli attack
The dollar, traditionally considered a safe haven, rises sharply this Friday after Israel’s attack on Iran, marking an increase in conflict tensions in the Middle East, just days after Iran launched a drone attack against Israel. The event marks a possible intensification of the conflict between Iran and Israel, which could result in a deterioration of geopolitical conditions in the region, especially after the attacks near Iranian nuclear facilities.
Despite this, the dollar is likely to remain strong this week.a, as strong US economic data and lingering inflation concerns have led investors to reconsider the chances of the Federal Reserve cutting interest rates in the near term.
The pound sterling rises despite weak UK retail sales performance.
In Europe, EUR/USD rose 0.1% to 1.0648 after producer prices in Germany fell less than expected in March, with a year-on-year decline of 2.9%, versus to the 3.2% forecast.
Immediate effects of the attack
The price of oil rebounds, gold also rises, and Wall Street index futures turn red. In Asia, the three main stock market indicators closed with losses led by the Nikkei, which lost 2.7%, followed by Shanghai, which lost 0.3%. Meanwhile, the Hang Seng fell 0.9%.
Regarding the futures of Wall Street indices, the Nasdaq drops 0.5% and the S&P 500 drops 0.2% with stocks like Tesla and Intel falling sharply.
In Europe, European stock markets fall to their lowest levels in more than a month, after the escalation of the conflict in the Middle East. The continental STOXX 600 falls 0.6% and loses 1.6% so far this week. The index was on track to post its biggest weekly drop since last October.
The indices of the main European economies, such as Germany, France, Italy and Spain, fell between 0.6% and 0.9%.
Although the price of crude oil could stabilize at current levels (due to international pressure on Israel not to respond aggressively to Iran and the low probability of Iran impeding transit in the Strait of Hormuz – which represents 20% of global oil trade) crude -, since this route is also vital to supply its main customer, China), the risk is on the rise if the conflict extends to the Middle East, international analysts maintain.
Source: Ambito
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