Dollar firm as war widens in Middle East

The U.S. dollar surged on Wednesday following an Iranian missile attack on Israel, as investors sought safe-haven assets amid rising tensions. The dollar index climbed 0.5% to 101.2, driven by strong U.S. job openings data and concerns over Middle East conflict.

The dollar saw its most significant increase in a week on Wednesday, fueled by rising investor anxiety following an Iranian missile attack on Israel. This escalation has driven demand for safe-haven assets as concerns grow over potential wider conflict in the Middle East.

The U.S. dollar index rose roughly 0.5% overnight to 101.2, driven by a job openings report that exceeded expectations.

Early trading in Asia showed limited movement, with the euro remaining below $1.10 after experiencing its largest drop in nearly four months. The yen held steady at 143.45 per dollar, while the Swiss franc was at 0.8463 per dollar. In contrast, the New Zealand dollar faced a setback, down 1.1% at $0.6283, and oil prices jumped by 2.5%.

The Australian dollar also faced pressure, trading at $0.6883, though losses were mitigated by positive retail sales data released earlier this week. The British pound dropped 0.7% overnight but steadied at $1.3278 during early Asian trading.

Westpac strategist Imre Speizer remarked on the unpredictable nature of the situation in the Middle East, suggesting that market sentiment could improve if escalation does not occur, allowing a return to economic fundamentals.

Later today, U.S. private payroll data is expected to be released, alongside a highly anticipated vice presidential debate between Democrat Tim Walz and Republican JD Vance. Traders are also monitoring a significant labor dispute as East and Gulf Coast dockworkers begin their first large-scale strike in nearly 50 years, impacting about half of the country’s ocean shipping.

As the situation unfolds, market participants remain vigilant, balancing geopolitical risks against economic indicators.

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