By Jiaxing Li
HONG KONG, April 2 (Reuters) – The dollar advanced against major currencies on Thursday, reversing two days of losses, as U.S. President Donald Trump’s address on Iran shattered hopes for a swift end to the Middle East conflict and dented investor sentiment.
In an eagerly anticipated address, the president vowed more aggressive strikes on Iran in the next two to three weeks, offering no concrete timeline to end the war that has rattled investors and roiled markets.
Investors were quick to exit risky assets and buy the U.S. dollar, pushing the yen, euro, sterling and most of the emerging market currencies lower.
The dollar index, which measures the greenback against a basket of currencies, climbed nearly 0.5% to reclaim the 100 level as the safe-haven trade came back on.
Thursday’s advance wiped out most of the greenback’s declines from the past two days amid earlier optimism about de-escalating the Iran war, putting it on track for another winning week.
Stocks slid and oil prices surged, with Brent crude futures rising more than 6% to near $110 per barrel, after Trump’s address sparked fresh concerns about sustained disruptions and worries about stagflation.
“Trump’s comments failed to reassure markets … markets are starting to realize that the war will probably escalate further from here before de-escalating,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
“The dollar can definitely increase further from here against all the major currencies” as markets wake up to the fact that the global economy will just slow down materially from here, she added.
The euro stood at $1.1537 and the sterling fetched $1.3233, both down roughly 0.5% versus the dollar to give up some recent gains.
The risk-sensitive Australian dollar and the New Zealand dollar were both down roughly 0.7% to hover near two-month lows seen earlier in the week, trading at $0.6878 and $0.5709, respectively.
The Japanese yen traded 0.4% weaker at 159.375, but it was still away from the psychologically important 160 level that is viewed as the line in the sand for intervention by Japanese authorities.
Trump’s comments also sent U.S. Treasury yields higher in Asia on growing fears that the inflation from higher oil prices would close the door to any prospect of easier monetary policy.
That sets the stage for Friday’s U.S. non-farm payrolls report. The market is looking for a 60,000 rise in jobs for March, according to the median estimate of economists polled by Reuters.
“Another miss could rattle the markets and crank the volume up on the chorus warning about stagflation,” given the challenges the U.S. Fed will face in lowering rates in the near term due to inflation and the energy shock, said Kyle Rodda, senior financial market analyst at Capital.com.
“The markets could be extra choppy going into the Easter long weekend.”
(Reporting by Jiaxing Li in Hong Kong; Editing by Shri Navaratnam, Thomas Derpinghaus and Stephen Coates)
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