The U.S. Dollar Index (DXY) surged to a yearly peak of 99.84 as escalating Middle East tensions drove investors toward the dollar as a safe haven. Foreign funds exited Asian stock markets, triggering sharp declines in key indices. Meanwhile, traditional assets like gold and silver plunged by approximately 6% and 5% respectively, leaving the U.S. dollar as the sole major asset trading in the green amid the conflict.
The DXY index, which tracks the U.S. dollar, reached a yearly high of 99.84 on Monday and is likely to reach the 100 range. The index rose 1.92% since the conflict between Iran and Israel began as traders exited the broader stock market. Foreign and institutional funds pulled out billions from Asian stock markets, continuing the sell-off.
India’s Sensex, Japan’s Nikkei, Hong Kong’s Hang Seng, and Singapore’s SXG are bleeding profusely in the charts. Gold prices plunged by 6%, while silver fell more than 5%, leaving only the U.S. dollar in the green. Leading currencies such as the euro, pound, and the yuan are trading in the red in the forex charts.
The euro fell 0.38% to $1.1526, and the yen weakened 0.22% to 159.55 per dollar. Sterling dipped 0.37% to $1.329, according to market data. “If markets price a U.S. tightening cycle, the U.S. dollar will lift strongly against all currencies in our view,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
“AUD would fall against most, if not all, major currencies if global downgrades occur,” he added. Rodrigo Catril, a currency strategist at National Australia Bank, explained investors are seeking economies that can withstand a supply shock. “The market’s going with the idea that those countries and economies that enjoy a positive supply shock from energy are likely to perform better,” he stated.
“So you’re seeing the euro and the yen struggling to perform. And again, if this conflict proves long-lasting, you would think that those are the currencies that are likely to suffer a bit more.” The U.S. dollar is withstanding the market’s whiplash while other leading currencies are folding. This puts the USD in the spotlight as the DXY index delivers results.
