Oil-exporter currencies, safe havens rally after Saudi attacks

US dollar and Euro notes are seen in this November 7, 2016 picture illustration. — Reuters pic
US dollar and Euro notes are seen in this November 7, 2016 picture illustration. — Reuters pic

LONDON, Sept 16 — Currencies linked to the price of oil rose today after an attack on Saudi Arabian refining facilities disrupted global oil supplies, while the Japanese yen and Swiss franc strengthened as nervous investors sought safety.

Oil prices surged nearly a fifth at one point following the strikes on two plants, which knocked out more than 5 per cent of global oil production. Yemen’s Iran-aligned Houthi group claimed responsibility, but the United States blamed Iran.

The Norwegian crown surged as much as 0.7 per cent, then settled at 8.964 crowns against the dollar, up 0.3 per cent on the day. It was also 0.3 per cent ahead versus the euro.

The Canadian dollar rose 0.2 per cent to C$1.3259 (RM4.17). The Russian rouble was also higher.

The currencies of oil importers such as Turkey and India underperformed.

Overall, the forex market reaction was limited. A bigger concern was that a supply-side shock and growing geopolitical tensions would damage an already fragile global economy, MUFG analyst Lee Hardman said.

“Downside risks for the global economy would intensify if geopolitical risks in the region continued to escalate, creating a more unfavourable environment for high beta emerging market and high yielding currencies,” he said.

The Japanese yen, a common choice for investors seeking shelter from market uncertainty, rose 0.2 per cent to ¥107.85 (RM4.17) per dollar. The Swiss franc rallied versus the euro but was only up 0.1 per cent at 1.0959 by 0730 GMT, suggesting some calm had returned to markets.

The US dollar slipped 0.1 per cent against a basket of currencies. It was little changed versus the euro at US$1.1079 (RM4.62).

China weakness

In China, data released today showed industrial output grew in August at its slowest pace in more than 17 years and retail sales rose less than expected. That added to pressure for stimulus, and in offshore trade the Chinese yuan weakened 0.3 per cent to 7.0653 per dollar.

The market focus today was the Middle East, but attention will also remain on central bank meetings in the United States and Japan. Expectations the Federal Reserve would cut interest rates on Wednesday had lessened; now investors are sure they’ll fall and are divided only over how much.

A third of economists polled by Reuters expect the Bank of Japan to announce ramped-up stimulus on Thursday. But sources say it may be a close call — policymakers will wait to assess market reaction to the Fed’s decision hours earlier.

Japanese markets are closed today for a public holiday.

Sterling, which has soared over the past week on growing investor confidence that a no-deal Brexit is off the table, fell 0.3 per cent to US$1.2466. It was down 0.5 per cent against the euro at 88.970. — Reuters