Safe-haven Swiss franc hits highest since 2015 as Iran conflict lifts energy prices

SINGAPORE, March 2 — The Swiss franc soared to its strongest in more than a decade versus the euro while the dollar hit a five-week high today as investors sought the safest assets after US and Israeli strikes on Iran raised the risk of a protracted conflict.

The franc shot 0.7 per cent higher to its strongest since 2015 on the euro at 0.9030 in early Asian trade, and climbed as much as 0.4 per cent to 0.7661 per dollar.

The dollar index, which measures the US currency against the franc, euro and four other major peers, rose as much as 0.3 per cent to reach 98.273 for the first time since January 23. The strikes killed Iran’s Supreme Leader Ayatollah Ali Khamenei, setting off a high-stakes succession race.

Attacks extended into today after Iran hit back, with the Iranian Revolutionary Guard saying it had struck three US and British oil tankers, while blasts were reported across Israel, the UAE, Qatar, Bahrain and Kuwait.

“You don’t know how long this is going to last, how high oil is going to go, how long the Strait of Hormuz is going to be closed,” said BNZ strategist Jason Wong in Wellington. “The initial reaction is mild risk off, and you’ve just got to take each day as it comes.” Oil prices were investors’ initial top focus and ⁠leapt around 9 per cent early today on disruption to sea-borne trade. After a knee-jerk ⁠appreciation, the yen weakened 0.6 per cent to 157 yen against the dollar as traders digested the ⁠effect of the jump in energy prices ⁠on oil imports, while assessing ⁠what the conflict could mean for Bank of Japan policy.

“We had already viewed the likelihood of an interest rate hike in March or April as low, but amid rising uncertainty stemming from developments of the situation in the Middle East, the BOJ is likely to adopt ⁠a more cautious stance, further reducing the probability of a near-term rate hike,” Morgan Stanley MUFG analysts wrote in a research report.

The Norwegian crown appreciated 0.7 per cent versus the dollar, while the currency of fellow oil exporter Canada was steady. The euro fell 0.8 per cent to US$1.172525 (RM4.59) on the potential for disruption to energy supply in Europe, while sterling slumped 0.9 per cent to US$1.3372. The President of Cyprus said on Monday that Britain’s Royal Air Force base of Akrotiri was targeted by an unmanned Shahed drone, causing minor damage and no casualties.

“The euro is in a ⁠difficult spot,” Wells Fargo analysts said in a note. “Europe’s natural gas storage refill season is about to begin and the EU is heading into it with record-low gas in storage, implying it will need to buy a large ⁠chunk of energy right as prices potentially shoot higher.” The risk-sensitive Australian dollar tumbled as much as 1.2 per cent against the greenback, and the New Zealand ⁠dollar dropped as much ⁠as 0.8 per cent. China’s yuan in offshore trade was 0.3 per cent weaker at 6.8801 yuan to the dollar, as the People’s Bank of China weakened its daily fixing price for the currency onshore to stem appreciation. China is an energy importer and the main buyer of Iranian oil. Israel expanded its military campaign to include Iran-backed Hezbollah militants in Lebanon today.

US President Donald Trump told the Daily Mail the military campaign could run for a month. “We figured it will be four weeks or so. It’s always been about a four-week process,” he said. — Reuters