NEW YORK, March 9 — The United States (US) dollar rose broadly on Monday as surging oil prices, driven by the US-Israeli war on Iran, pushed investors toward the greenback amid fears that a protracted conflict could disrupt global energy supplies and weigh on economic growth.
The euro was last down 0.5 per cent to US$1.1564, after earlier touching a more than three-month low of US$1.1505. The dollar was up 0.3 per cent against the Japanese yen to a six-week peak, while sterling was 0.5 per cent lower against the US currency.
"Ultimately, the US dollar always plays well as a safe haven in a world of chaos. It also tends to win when the United States shows any type of military strength," said Monex USA trading director Juan Perez.
Stocks, bonds, and precious metals slid as investors worried about the impact of surging oil prices on global inflation and economic growth. On Monday, Iran named a Supreme Leader, signalling that hardliners remain firmly in charge in Tehran a week into the war.
The dollar pared some gains after a Financial Times report said G7 finance ministers will discuss a joint release of oil from emergency reserves on Monday, coordinated by the International Energy Agency.
The report saw oil prices trim gains after they earlier spiked to just shy of US$120 per barrel. Brent crude was last up 10 per cent at US$102.99 a barrel, after earlier surging more than 25 per cent.
However, Perez warned that the dollar's newfound strength was not on solid footing and could come under pressure if the conflict in Iran were resolved quickly.
"This war is not happening in the midst of a good economic situation for the United States. It is actually happening at a moment when the economic situation is in doubt.
"The moment there is any quick resolution...it is going to hurt the dollar big time," he said.
Surprisingly weak US jobs data on Friday briefly stalled dollar gains and raised expectations for US rate cuts, but that had faded by Monday.
Traders were betting on around 35 basis points of Federal Reserve easing by the end of the year, after pricing in more than 55 basis points in late February.
Traders weigh exposure to energy shock
The Canadian dollar held steady against the greenback, supported by rising oil prices. Canada is a major oil exporter, and higher crude prices tend to bolster both its economy and government revenues.
"The CAD has been able to dust off its "petro currency" credentials in a meaningful way over the past week," said Scotiabank chief currency strategist Shaun Osborne in a note. The loonie rose 0.6 per cent against the dollar last week.
Analysts have said Asia could bear the brunt of the energy price shock, due to the region's heavy reliance on oil and gas from the Middle East, while the United Kingdom and the euro zone are also heavily exposed.
The dollar was close to the 159 yen level on Monday.
"The real question is how high and how long prices stay elevated, because that is what will ultimately determine the economic fallout. A prolonged conflict, coupled with continued currency weakness, would feed more directly into inflation pressures across the region," said ING's Asia-Pacific regional head of research Deepali Bhargava.
Leading cryptocurrency Bitcoin rose three per cent to US$69,117, but remained close to the multi-year low touched in early February.
