World News

Dollar inches lower vs yen, Swiss franc amid Iran sanctions

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The U.S. dollar edged lower from four-week highs against the safe-haven Japanese yen and slipped versus the Swiss franc on Friday as possible renewed U.S.-Iran tensions weighed on market sentiment.

The greenback was also pressured by weaker-than-expected U.S. payrolls data for December, which followed a batch of strong economic figures. The report, however, was unlikely to sway the Federal Reserve from its neutral stance on interest rates.

The dollar index still posted its best weekly performance in two months.

Over the last few sessions, the currency market has been badgered by geopolitical tension. The yen and Swiss franc had fallen from highs hit last week after the United States and Iran, in recent comments, moved away from an all-out conflict.

Concerns grew, however, after the United States imposed more sanctions on Iran on Friday in response to its retaliatory missile attack on U.S. forces in Iraq and vowed to tighten the screws further on the Iranian economy if Tehran continued to engage in what it described as terrorist acts.

U.S. Secretary of State Mike Pompeo, in an appearance at the White House, said he had “no doubt” that Iran had full intention of killing U.S. forces in a missile attack on a base in Iraq in retaliation for the U.S. killing of Iranian commander Qassem Soleimani.

“The fact that the U.S. is still sort of acting aggressively toward Iran and still taking a hard line, helped create demand for safe havens,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

Wall Street shares fell, while U.S. yields sank as investors flocked to the Treasury market.

The renewed U.S.-Iran tension came on the heels of a soft U.S. non-farm payrolls report. The dollar lost steam after the jobs data.

U.S. data showed non-farm payrolls increased by 145,000 last month, lower than market forecasts of 164,000. Data for October and November was revised to show 14,000 fewer jobs added than previously reported.

More importantly, average hourly earnings rose just 0.1%, after increasing 0.3% in November. Markets were expecting a 0.3% rise.

“The silver lining here is that a job and income growth slowdown has already been incorporated into our 2020 economic outlook. So while the December jobs and income data was somewhat worse than we forecast, the 2020 outlook for a U.S. GDP growth slowdown, but no recession, remains intact,” said Scott Anderson, chief economist, at Bank of the West.

Against a basket of currencies <.DXY>, the dollar fell 0.1% to 97.30. The dollar index hit a two-week high of 97.584 during the session.

The dollar also eased from a four-week peak against the yen to trade slightly lower on the day at 109.49 yen <JPY=>.

The greenback also dipped versus the Swiss franc to 0.9727 <CHF=>.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by David Gregorio, Dan Grebler and Richard Chang)