Investing.com – The US dollar rose on Wednesday, with the safe haven adding to sharp gains made in the previous session, as an Iranian missile attack on Israel escalated tensions in the volatile region.
At 03:45 EST (07:45 GMT), the dollar index, which tracks the US currency against a basket of six other currencies, rose 0.1% to 100.969, after rising about 0.5% in the previous session, the largest rise He has had it since September. 25.
The dollar rises as a safe haven
Unrest in the Middle East escalated overnight with Iran launching a barrage of ballistic missiles at Israel in response to the recent killing of Iran-backed Hezbollah leader Hassan Nasrallah and Israel deploying ground forces in southern Lebanon.
Iran said its attack was over, barring further provocations, but Israel vowed to respond, which could drag the United States, which supports it, into the unrest.
“The escalation in the Middle East has markets pricing in a greater risk of full-blown conflict in the region, which could include the United States,” analysts at ING said in a note.
The dollar also received support on Tuesday from a stronger-than-expected reading in the United States, especially ahead of the widely watched official monthly report on Friday.
“While ISM manufacturing was slightly weaker than expected and prices paid fell below 50.0, the Fed is laser-focused on the jobs market, and August’s surprise jobs rebound is contributing to a short-term bullish case for the dollar,” ING added.
The main economic release on Wednesday will be the September number.
The euro stabilizes after the sell-off
In Europe, it was trading largely flat at 1.1067, after its biggest drop in nearly four months on Tuesday, following further signs of slowing inflation in the euro zone.
The region fell below the ECB’s 2.0% target in September, and traders will look to comments from a range of ECB speakers, including the Vice President and Chief Economist, for further guidance on the ECB’s future monetary policy.
Citigroup, in a note issued on Tuesday, said it now expects the European Central Bank to cut interest rates by 25 basis points at its meeting on October 17, and expects subsequent cuts in December and into the beginning of 2025 to raise the interest rate to 1.5 points. % by September 2025.
It traded 0.1% higher at 1.3293, well below last week’s high of 1.3430, a level not seen since February 2022, with this week being a quiet one on the UK economic data calendar.
The yen is falling due to uncertainty about interest rates
It rose 0.3% to 144.06, after Japan’s newly appointed Economy Minister, Ryusei Akazawa, said on Wednesday that Prime Minister Shigeru Ishiba expects the Bank of Japan to make careful economic assessments when raising interest rates again.
The Bank of Japan’s July meeting, released earlier this week, also showed that policymakers are divided on how quickly the central bank should raise interest rates further.
It rose to 7.0185, with yuan trading calm with Chinese markets now closed until Tuesday next week as the country celebrates Golden Week.