SINGAPORE: The dollar rose to a three-month high in early Asian trade on Wednesday as investors retreated from the euro as escalating conflict in the Middle East raised concerns about a sustained rise in energy prices.
The euro traded 0.1% lower at $1.1604, hitting its lowest since late November and extending its decline into the third day. This followed data released on Tuesday showing euro zone inflation rose more than expected in February, before the Iran conflict erupted.
“The impact of the Iran war on the EUR/USD boils down to one of energy,” said George Saravelos, global head of currency research at Deutsche Bank. “A negative supply shock is underway, which means direct taxes on Europeans who have to pay in dollars to foreign producers.”
Financial markets turned sharply risk-off on Tuesday as growing concerns about soaring inflation spilled over into stocks and bonds after Israeli and U.S. militaries shelled targets across Iran, triggering a rush for cash among investors.
Global oil and gas prices are soaring as the US and Israel’s war against Iran halts energy exports from the Middle East, attacks by Tehran on ships and energy facilities cut off shipping in the Gulf and force production shutdowns from Qatar to Iraq.
The benchmark Brent crude oil contract rose 5.4% to $81.96 a barrel on Tuesday, marking a 12% rise since Friday and at one point hitting its highest since July 2024. Gasoline prices in Europe have risen 70% since last weekend.
The U.S. dollar index, which measures the dollar’s strength against a basket of six currencies, was steady at 99.103, its highest level since Nov. 28.
Against the yen, the dollar fell 0.1% to 157.555 yen.
Against the Chinese yuan, the dollar fell 0.1% to 6.9139 yuan in offshore trading ahead of the release of public and private sector PMI data for February.
The Australian dollar fell 0.1% to $0.7028 after fourth-quarter gross domestic product (GDP) data beat market expectations. The New Zealand dollar fell 0.1% to $0.5886, and the British pound fell 0.1% to $1.3340.
Bitcoin rose 0.7% to $68,533.21, and Ether rose 1.1% to $1,990.99. (Reporting by Gregor Stuart Hunter; Editing by Jacqueline Wong)
