Investors flocked to safe-haven currencies, such as the yen, Swiss franc, and US dollar, following a warning from Russia about its revised nuclear strategy.
President Vladimir Putin warned the United States on Tuesday, lowering the bar for a nuclear attack, following reports that the Joe Biden administration had let Ukraine launch long-range missiles built in the United States deep into Russia.
The yen surged 0.8% against the euro and 0.5% against the dollar, reaching 161.50, its highest level since October 4.
Laptops 1000Traders are on high alert for any action by Japanese authorities to support the currency, as the yen has dropped almost 7% since October and last week broke through the 156 per dollar mark for the first time since July.
After reaching its highest level since early August at 0.9305, the Swiss franc was up 0.3% against the euro at 0.9325.
The dollar’s value concerning a basket of other currencies is measured by the U.S. dollar index, which increased by 0.25% to 106.46.
Last week, it reached 107.07, the highest since November 2023.
“Typical risk-off move in forex following the headline,” Athanasios Vamvakidis, Bofa’s global head of foreign currency strategy, said about the response to the Kremlin announcement.
“The market has been complacent on geopolitical risks, focusing on other themes,” he stated. “Positioning has been a long risk, getting even more stretched after the U.S. elections.”
Reduced expectations about the size of rate reduction by the Federal Reserve and the belief that U.S. President-elect Donald Trump will implement inflationary policies have helped the dollar gain more than 2% this month.
As investors keep a tight eye on Trump’s search for a Treasury secretary, the dollar sharply increased the European day.
Former Federal Reserve Governor Kevin Warsh, and Marc Rowan, the CEO of Apollo Global Management are some candidates under consideration.
