FX Roundup: Yen, Swiss franc up on safe haven demand

Safe haven demand sent the yen and Swiss franc higher on Monday amid escalating tensions in the Middle East.

At 1407 GMT, the dollar was trading 1.12% lower against the yen changing hands at JPY119.20, while the Swiss franc was broadly flat exchanging at CHF1.0016 and CHF 1.0876 versus the greenback and euro respectively, having notched average gains of over 0.8% earlier in the session after Saudi Arabia executed a Shia cleric and traded verbal salvos with Iran.

The Saudis, along with several of their regional partners including Bahrain and the United Arab Emirates, also curbed diplomatic ties with Tehran, sending investors flocking to safe haven currencies and gold.

Jane Foley, senior FX strategist at Rabobank, said, “Diplomatic strain between Saudi Arabia and Iran appears to have brought a fresh burst of geopolitical risk for investors this month. The situation reflects a surge in demand for safe havens with the JPY and CHF being the best performing G10 currencies on a 1-day view.”

Meanwhile, the dollar shed another 0.07% against the pound changing hands at $1.4735, while the euro weakened changing hands against the dollar at $1.0855, down 0.03%.

Commodity linked currency crosses continued to suffer during the first full trading session of 2016. The Australian dollar fell against its US counterpart exchanging at US$0.7185 down 1.62%, while the New Zealand dollar was also down 2.03%, changing hands at US$0.6743.

Analysts at Societe Generale, said, “The El Nino weather phenomenon is causing drought in New Zealand as the Southern hemisphere’s summer progresses. A worsening of the drought would have a negative impact on growth as agricultural production is sharply reduced.

“The severe 1997-98 El Nino, for example, shaved off 0.7 percentage points from NZ's GDP growth during the year. We remain negative on NZD, and note that NZD/USD has again failed at 0.69.”

The greenback also registered gains against the Canadian dollar changing hands at CAD$1.3907, up 0.38%.

Finally, in Latin America, the dollar traded higher against major regional crosses including upticks against the Chilean (up 1.21%), Mexican (up 0.57%) and Colombian (1.21%) pesos, and the Brazilian real (up 1.62%).