On Friday. following a U.S. air strike on Baghdad airport which killed a senior Iranian military official, the Japanese yen led other safe-haven assets higher even as the price of crude oil jumped by $3.
Gold prices as well as U.S. Treasury bonds saw a rally after an Iraqi militia spokesman disclosed to the media that Iran’s Major-General Qassem Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis were killed in the U.S. air strike.
The Pentagon has confirmed the attack, saying Soleimani was actively developing plans to attack Americans in Iraq and the Middle East.
“We are only into the third day of the new year, and a big fat dollop of geopolitical uncertainty has landed on investors’ desks,” said Jeffrey Halley, senior market analyst for Asia Pacific at broker OANDA. “I am struggling to see how an Iranian riposte will not occur. Oil installations and tankers were my first thoughts.”
Oil prices have jumped by around $3 a barrel.
Following the news of the airstrike, the greenback slid by 0.4% to 108.14 yen breaking several layers of chart support and touched its November 2019 nadir. The euro also dipped to its three-week low at 120.63 yen.
During times of global tension, the yen is often used as a safe harbour given Japan’s status as the world’s largest creditor nation.
Since there is a holiday in Japan today, there have been no transaction in cash Treasuries, Treasury bond futures however gained 7 ticks on the news signalling a drop in U.S. Treasury yields.
The USD eased a fraction to 96.770, against a basket of currencies, but stayed above recent six-month lows around 96.355.
Earlier the dollar had found overnight support following dismal economic news coming from the UK and Europe, which weighed on the pond and the euro.