By Tom Westbrook
SINGAPORE (Reuters) – Currencies whipsawed on Wednesday as the safe-haven yen first jumped on news of Iranian missile strikes on bases hosting U.S. troops in Iraq, before retreating as investors wagered it would not trigger a wider conflict in the region.
More than a dozen ballistic missiles shot through the night from Iranian territory toward the two Iraqi military bases. The attack was a retaliation for the U.S. killing of Iranian commander Qassem Soleimani, Iranian officials said.
The air strikes early on Wednesday came hours after the general’s funeral, and sent the yen to a three-month high – until the absence of immediate reports of casualties steadied nerves.
Twitter posts from both sides playing down the prospect of further escalation also helped calm the currency market.
U.S. President Donald Trump tweeted that a damage assessment was “So far, so good!” and said “all is well,” promising a further statement on Wednesday morning. Iranian Foreign Minister Mohammad Javad Zarif Tweeted that the attack was “proportionate” and that “we do not seek escalation or war.”
Iraq’s military said there were no casualties among Iraqi military forces.
“If the market was really worried that the end of the world was nigh, dollar/yen would have collapsed, and that’s clearly not been the case,” said Stuart Oakley, global head of flow FX at Nomura in Singapore.
The Swiss franc
Investors’ focus will now be on what response, if any, the United States is planning.
“Essentially people are betting that this is not going to be our main focus three months from now,” said Westpac analyst Sean Callow.
Oil prices, which initially jumped, fell back too as analysts said market tension could ease as long as oil production facilities remain unaffected by attacks. [O/R]
Elsewhere, the dollar mostly hung on to overnight gains on other major currencies, and wound up steady against the Aussie
The greenback had been buoyed on Tuesday by a strong showing in a non-manufacturing business survey, which had analysts boosting fourth-quarter economic growth forecasts and looking for strength from U.S. labor market data due on Friday.
(Reporting by Tom Westbrook. Editing by Simon Cameron-Moore and Jacqueline Wong)