Currencies Volatile Due To US Air Strike On Iran

The American attack on an Iranian general is causing a lot of price turbulence in the currency world. In addition to safe currencies such as the Japanese yen and the Swiss franc, there is also another group of currencies that can gain ground.

The death of Iranian General Qassem Soleimani after an American airstrike in Iraq has echoed strongly in the currency world as well as on stock markets. The dollar rose slightly against the euro. But it was obvious which coins are seen by traders as safe havens.

Primarily, it was the Japanese yen, which briefly rose 0,5% against the dollar to its 2-month high. The large increase by currency terms was partly caused by the fact that Japanese stock trading was halted as a result of a local holiday. As a result, the trading volume in the yen was lower than usual and that often leads to somewhat sharper price movements.

Safe currency par excellence
Next to the yen, the Swiss franc is the safest currency of choice. Against the euro, the currency almost reached its lowest level since the spring of 2017. In recent months, the franc has made some ground gains at times when concerns about Brexit or the US-China trade conflict flared up.

The rally of the yen and the franc is therefore a nice foretaste of what will happen in the currency world in 2020 once political or economic tension mounts. However, the response to the attack on Soleimani provides another clue of what the new year may bring.

Striking zigzag
The currencies of oil-exporting countries showed a striking zigzag movement Friday morning. Following news of the attack, the Russian ruble and Norwegian krone fell somewhat against the euro. However, a recovery followed after a few hours. This, of course, has everything to do with the rise in oil prices.

A barrel of Brent oil was briefly paid more than $69, compared to less than $66 on Thursday morning. At the beginning of August, that same barrel still cost $58. The sharp rise in the oil price explains why both currencies have increased in value by more than 4% against the euro since the beginning of October.

Stir up unrest
It could just be that the advance of oil currencies will continue in 2020. Iran and Iraq together account for more than a fifth of total OPEC oil production. Iran has already announced that it will retaliate. On the other hand, it does not look bad for US President Donald Trump to stir up the conflict with Iran in the election year.

That is, after all, a nice international diversion for the impeachment proceedings that the Democrats have recently started. One of the clues in the early days of 2020 is that oil currencies such as the ruble and krona could well be the surprises of the new year.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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