War violence in Syria leaves dollar cold

The global financial markets are hardly paying attention to the missile attacks on multiple Syrian targets and the US dollar is also not budging. The latter is no surprise, by the way.

The financial world has hardly paid attention to the missile attacks on Syria. The U.S. dollar did not move and the stock markets mainly focused on the various quarterly figures.

The United States (US) and allies recently fired more than 100 missiles at 3 chemical plants. The attack was in retaliation for the alleged use of chemical weapons by President Assad's army. It is not surprising that the financial market does not care much about a missile attack by the US.

lukewarm response
US President Donald Trump had already announced in advance that he would take action against Assad. So the attack came as no surprise. In addition, the markets usually react quite lukewarm to these kinds of events, according to research by US broker Charles Schwab.

There have been 25 such attacks in the past 13 years. On average, the prices fell by 0,2% the next day, while the dollar did not move on balance. The financial world is thus sending a clear signal that there is little chance of the conflict escalating.

Currency manipulation
The chance is therefore small that there will be a clash between the US and Russia, but that does not alter the fact that both countries will make each other's life miserable in other areas. About 1,5 weeks ago, Trump introduced new sanctions against Russia. He also accused the country of currency manipulation. He also lashed out at China.

According to Trump, both countries (in the series of US interest rate hikes) see an opportunity to push their currencies lower against the dollar. A day later, Treasury Secretary Steven Mnuchin rushed to explain that there is as yet no evidence of currency manipulation and that Trump's message should be seen primarily as a warning.

Flame in the pan
Op the currency markets nothing has changed as a result of the attacks in Syria. The direction of the dollar is still determined by the risk in financial markets. When things get tense, investors seek safe havens such as the US currency. And that is something Trump does not want.

In view of the international competitiveness of US business, he will be very interested in ensuring that political tensions continue to simmer without igniting the fire.

Lawrence Martins

Laurens Maartens is a currency expert at the Dutch Payment and Exchange Company (NBWM). Maartens analyzes current currency developments and also provides lectures and training in the field of currency management.

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