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Swiss Franc and Yen Rise Modestly, Retreat from Peaks as Iran-Israel Tensions Ease

Swiss Franc and Japanese Yen Stabilize as Iran Signals No Retaliation Against Israel

In New York, the Swiss franc and the Japanese yen witnessed a reduction in earlier gains on Friday following indications from Tehran that it would not retaliate against Israel’s recent limited-scale attack. The currencies had initially surged against their peers when the news broke but later moderated their advances.

During Friday’s afternoon trading session, the U.S. dollar declined by 0.2% against the Swiss franc, settling at 0.91 francs. The dollar had dipped to a two-week low of 0.9011 francs overnight. Similarly, against the Japanese yen, the dollar slightly decreased to 154.57 yen, after dropping to 153.59 yen post the initial news.

According to Iranian media and officials, the incident involved a few minor explosions in central Iran’s Isfahan, attributed to air defenses intercepting three drones. A senior Iranian official reassured that there were no plans for a retaliatory response against Israel, suggesting a de-escalation of tensions.

Market reactions were initially volatile, with a sell-off in risk assets and spikes in oil and gold prices, alongside rallies in U.S. Treasuries and safe-haven currencies following the escalation. However, as Eugene Epstein from Moneycorp noted, “the market’s initial poor reaction softened as the potential for prolonged conflict seems unlikely at this time.”

The U.S. dollar index, tracking the dollar against six major currencies, fluctuated throughout the day but ended nearly unchanged at 106.17. The euro and sterling experienced some volatility; the euro remained steady at $1.0648 late in the afternoon, while sterling dropped by 0.5% to $1.2370.

Amidst these developments, the broader market trend has seen the dollar strengthen significantly due to robust U.S. economic performance. This month alone, the euro is down by 1.3%, and sterling has decreased by 2%. Recent data indicating a 3.5% inflation rate in March has prompted market participants to adjust their expectations for Federal Reserve interest rate cuts, now anticipated to commence no earlier than September.

Boris Kovacevic, a strategist at Convera, highlighted, “While geopolitical tensions have stirred the markets, the primary focus for investors remains on the Federal Reserve and the enduring high-interest rates in the U.S.”

Additionally, concerns about Asian currency depreciation prompted finance leaders from the U.S., Japan, and South Korea to issue a joint warning, hinting at possible coordinated intervention to stabilize the rates.

The Bank of Japan, which is preparing for its monetary policy meeting next week, might consider another rate hike if the yen’s decline continues to fuel inflation, as per Governor Kazuo Ueda. Meanwhile, Japanese Finance Minister Shunichi Suzuki issued a warning against excessive speculative activities that could further depress the yen.

In the realm of cryptocurrencies, bitcoin saw a 1.1% increase to $64,287, with the market eyeing the upcoming halving event, which will decrease the rate of new coin creation as part of its built-in deflationary mechanism.


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