Dollar surges on Middle East war
The U.S. dollar index hit its highest since last May on Monday at 100.61 and, last sitting at 100.47, is up 2.9% through March, its sharpest monthly gain since July
The dollar headed for its biggest monthly gain since July on Tuesday and stands out as the strongest so-called safe asset as war in the Middle East has set oil prices surging, nearly everything else declining and raised the risk of global recession.
Crude was slightly lower in Asia trade but the dollar hardly budged.
It pushed 1% higher on South Korea’s won to 1,534 won, levels hit only in the wake of the global financial crisis in 2009 and the Asian financial crisis in 1997 and 1998.
The euro was kept below $1.15, while sterling and the Australian and New Zealand dollars were pinned to multi-month lows.
Renewed threats of intervention from Tokyo spared extra selling pressure on the yen, which hit its lowest since July 2024 on Monday and trades at 159.52 per dollar.
The dollar has been supported by the U.S. status as an energy exporter, by rising U.S. Treasury yields and by investors’ flight to cash over the past month of war, with Asian currencies suffering some of the largest losses.
Barring any clear, conciliatory messages from the Iranian side, it is hard to see the dollar handing back this month’s gains anytime soon, said Chris Turner, ING’s global head of markets.
Bonds, gold and safe-haven currencies such as the yen and Swiss franc have all dropped through March, as the energy shock delivered by $100-a-barrel crude oil exposed weaknesses.
The U.S. dollar index hit its highest since last May on Monday at 100.61 and, last sitting at 100.47, is up 2.9% through March, its sharpest monthly gain since July.
A looming inflation spike has hurt bonds. A positioning clearout has sunk gold, while the energy shock hurts Japan’s terms of trade and Swiss authorities have indicated they would intervene to stem any steep gains for the franc.
The dollar is up almost 4% for the month on the franc at 0.80 francs and has broken resistance levels for the Aussie and kiwi in recent sessions. The kiwi, down six straight sessions, is on the verge of breaking below 57 cents.