Dollar on track for second weekly rise; euro, yen at multi-month lows

By Stefano Rebaudo

March 13 (Reuters) – The U.S. dollar was on course for a second consecutive weekly gain on Friday as the war in the Middle East drove investors towards safe-haven assets, while energy-sensitive currencies such as the euro and yen slid to multi-month lows.

A sharp and prolonged rise in oil prices would severely hurt the economies of Japan and the euro area, which are heavily reliant on crude imports, while the United States would be relatively insulated, having been a net crude exporter for almost a decade.

However, economists remained wary of monetary tightening in the economies, where dependence on fuel imports means surging energy costs are likely to weigh on growth.

The euro fell to its weakest since August, and Japan warned that it was ready to take action to protect against declines in the yen, which touched its lowest in 20 months.

“These statements now sound more like attempts to somehow lower the oil price again, to which the market seems to be responding less and less,” said Volkmar Baur, forex strategist at Commerzbank, referring to recent remarks from the U.S. administration about a potentially swift end to the war.

 U.S. President Trump told G7 leaders in a virtual meeting on Wednesday that Iran is “about to surrender,” Axios reported on Friday citing three officials from G7 countries briefed on the contents of the call. 

Rising oil prices fuelled concerns about weaker growth and renewed upward pressure on inflation.

Brent futures edged lower on Friday as an Indian tanker sailed out of the Strait of Hormuz, after jumping in previous sessions. The U.S. sought to ease supply concerns by issuing a 30‑day license for countries to buy Russian oil and petroleum products stranded at sea. Earlier this week, the International Energy Agency agreed on Wednesday to release a record 400 million barrels of oil from strategic stockpiles. 

“There will only be so much that the IEA can do about this, in anything beyond the short term,” said Mark Dowding, BlueBay CIO at RBC BlueBay Asset Management.

Some analysts argued that emergency measures to ease oil supply disruptions may be sending a hidden negative signal to markets that world leaders see little room for quick de-escalation.

The dollar index, which measures the greenback against a basket of currencies, reached the highest level since November 28, thanks in part to its safe-haven appeal, but also because the U.S. is a net energy exporter.

The index rose 0.40% to 100.10 and was poised for a 1.25% gain this week.

EURO AT 7-1/2-MONTH LOW

The euro hit its lowest level since August at $1.1438, and was last down 0.40% at $1.1464.

Investors await the European Central Bank policy meeting next Thursday, while traders bet that surging oil prices could push the central bank to hike rates this year. 

Economists said a prolonged closure of the Strait of Hormuz would be needed to justify ECB monetary tightening to counter inflation. 

However, Citi argued that a couple of “insurance” hikes could not be ruled out, with the central bank potentially opening the door to that next week. Citi’s base case, however, is that uncertainty warrants ECB policy inaction.

The greenback rose to its highest since January versus the Swiss Franc at 0.7894, and was last up 0.18% at 0.7875.

YEN IN INTERVENTION TERRITORY

The yen slid up to 159.69 per dollar, the weakest since July 2024 and was last flat at 159.37.

Japan is ready to take the necessary steps against yen moves that impact people’s lives, Finance Minister Satsuki Katayama said on Friday, adding that she was in close contact with U.S. authorities on foreign exchange issues.

However, the recent reluctance by officials to talk up the currency could nudge the yen as low as 165 to the dollar, some analysts said.

“The problem for authorities in Tokyo and Washington, however, is that the dollar/yen will not turn sustainably lower until energy prices reverse,” said Chris Turner, head of forex strategy at ING, after arguing Japan authorities are firmly in intervention territory.

The Australian dollar weakened 0.40% versus the greenback to $0.7046.

(Reporting by Stefano Rebaudo; Editing by Lincoln Feast, Pooja Desai and Louise Heavens)