Dollar falls when oil strikes send investors to safety
SINGAPORE (Reuters) – Dollar fell while safe harbors and currencies for oil-producing countries rallied Monday, following an attack on refining Saudi facilities that disrupted global oil supplies and increased tensions in the Middle East.
FILE PHOTO: US dollar bills are curled and inspected during production at the Bureau of Engraving and Printing in Washington November 14, 2014. REUTERS / Gary Cameron / File Photo
Oil prices rose more than 15% after strike at two plants, including the world Abqaiq's largest petroleum refining plant accounted for more than 5% of the global oil supply.
Yemen's Iran-aligned Houthi group claimed responsibility for the damage, but the United States has pointed its finger directly at Iran.
The Canadian dollar CAD = D3 rose 0.5% in morning trade in Asia to 1.3224 per dollar. The Norwegian krone = rose almost 0.6% to 8.9363 per dollar.
Both currencies often move with the oil price because the countries are major oil exporters.
The attacks wiped out last week's fierce risk appetite and prompted US President Donald Trump to tweet the US was "locked and loaded" to get a response.
The safe harbor of Japanese yen and Swiss franc each raised at least 0.3% on the dollar. The yen JPY = EBS hit $ 107.60 per dollar and the franc CHF = touched $ 0.9771. Gold XAU = jumped by 1%.
Towards a basket of currencies. DXY the dollar was 0.2% lower at 98.053.
"If that part of last week's fall in oil and the improvement of geopolitical risk sentiment was the news of John Bolton's resignation … and thought this was a precursor to some kind of Trump-Iran approach, then it wouldn't be more valid, says Ray Attrill, FX strategy manager at the National Australia Bank in Sydney.
Beyond oil, foreign exchange markets await the outcome of central bank meetings in the US and Japan this week and crucial economic data in Australia and New Zealand that can determine the outlook for the Antipods
Much of the risk-taking shown last week was driven by signs of a thaw in US-China trade tensions, with both sides offering olive trees ahead of the trade talks next month.
However, with few solid signs of progress, the sentiment remains
"Geopolitical risks and rhetoric at the central bank are still important drivers of risk this week," said analysts from Australia and New Zealand Banking Grou p in a note.
In the United States, investors who had begun to trim expectations of a US central bank interest rate on Wednesday are now certain rates will fall and split only by how much. FEDWATCH
Markets also expect the Bank of Japan to push interest rates further into negative territory, with a third of economists told Reuters last week, expecting stimulus to increase.
Japanese markets are closed on Monday for a public holiday.
China's premier on Monday said it is difficult to maintain national economic growth above 6%, with protectionism weighing.
Monday's figures for retail and industrial production are likely to provide further insights into the health of the world's second-largest economy. The Chinese yuan was flat in morning trading offshore CNH =.
Pound GBP = D3 held last week's gain as fears of the UK crashed out of the EU without a divorce agreement, while a news report on Friday also aroused hopes that a deal could be secured by October 31st. [19659004] It stabilized at just under the highest since July 25 to $ 1.2491. Euro EUR = D3 was steady at $ 1.1077.
Reporting by Tom Westbrook; Editing by Sam Holmes
