Fx-U.S. strike in Iraq lifts yen grim U.S. factory facts knock dollar – Reuters

(New all over alterations dateline, prior LONDON)

By Kate Duguid

NEW YORK, Jan 3 (Reuters) – Investors rushed into harmless-haven property on Friday following U.S. air strikes in Iraq killed a senior Iranian military official, sending the Japanese yen to a two-month higher, even though the weakest U.S. factory exercise in a ten years sent the dollar reeling.

In addition to the yen, U.S. Treasuries, German bunds and gold rallied following the right away air strike in Baghdad killed Qassem Soleimani, commander of Iran’s elite Quds Pressure and architect of its escalating military affect in the Middle East.

“Overall, geopolitical danger premia have risen substantially right away. You’re wanting at inflows into the U.S. dollar, Swiss franc, Japanese yen – buyers seriously wanting for harmless havens and a port in the storm,” explained Karl Schamotta, chief sector strategist at Cambridge Global Payments.

The U.S. dollar index in the beginning benefited from the go into harmless-havens, but all those gains have been erased following the report of a contraction in the production sector in December. It was last unchanged on the day at 96.846.

The Japanese yen experienced risen as higher as 107.ninety one for each dollar and was last up .fifty four% on the day at 108. The yen is often found as a haven from danger, specified Japan’s status as the world’s largest creditor nation. A vacation in Tokyo also produced for skinny conditions, exaggerating the go.

The assault sparked concerns about crude source disruptions, lifting oil prices much more than $3. Petrocurrencies acquired a little on the better crude prices, but all those have been then largely offset by the general go absent from danger, explained Schamotta.

The U.S. production sector contracted in December by the most in much more than a ten years, with purchase volumes crashing to a close to eleven-12 months lower and factory work falling for a fifth straight month, according to a report from the Institute for Offer Management released on Friday.

“That is a depressing quantity,” explained Schamotta.

It indicates “trade war-similar uncertainty has basically destroyed the production sector on a sustained basis and that details to weak point in GDP, specifically in the coming quarter for the reason that what you’re probably to see is an stock drawdown as opposed to ongoing build.”

The lengthier-term consequences on the dollar are unclear. Nevertheless down on Friday, the dollar may eventually gain if weak U.S. production dents hopes for world progress in 2020.

“The notion that other international locations that are substantial exporters to the U.S. may see a substantial rebound in the close to term – that notion is losing traction listed here,” explained Schamotta.

Reporting by Kate Duguid and Olga Cotaga Modifying by Dan

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