USD Surges Amid Rising Safe-Haven Demand Amid US-Iran Conflict
The US Dollar (USD) rose on Monday as safe-haven demand increased due to ongoing geopolitical tensions between the United States and Iran. The USD/CHF pair inched higher, trading around 0.8090 during Asian hours, after experiencing over 0.5% losses in the previous day.
The tensions remain high as the conflict enters a critical diplomatic phase, with intense military engagements and strategic pressure surrounding the Strait of Hormuz. Iran stated that talks with Oman to establish a safe shipping route through the waterway are nearing an agreement but warned that any deal would not result in an immediate reopening.
Iran-backed Houthi militants in Yemen claimed a recent attack on Saudi Arabia's Jazan refinery, and a tanker operated by the Abu Dhabi National Oil Co. came under attack in the Strait. Tehran rejected direct negotiations with the United States for now, citing alleged breaches of the interim peace deal reached in June.
The Nonfarm Payrolls (NFP) unexpectedly dropped by 23,000 in July, while sharp downward revisions to 20,000 from the previous 57,000 highlighted weakening labor market conditions. CME FedWatch Tool suggests that markets now see around a 46% probability of a 25-basis-point rate hike in September, down from 67% a week earlier.
The Swiss Franc (CHF) stayed on the back foot as the SNB appears comfortable with a weaker currency, analysts at OCBC note. With inflation subdued and policy rates likely anchored at zero, the backdrop favors continued softness in the currency, and CHF weakness could persist into year-end.