The US Dollar remained close to a one-week high during Asian trading on Wednesday as renewed military exchanges between the United States and Iran boosted demand for the safe-haven currency.
Meanwhile, the New Zealand Dollar climbed after the country’s central bank raised interest rates and signalled that further policy tightening could follow.
The Dollar strengthened 0.1% against the Japanese Yen to 162.33, marking its fourth consecutive day of gains and reaching its highest level since 2nd July.
Iran’s Revolutionary Guards announced on Wednesday that they had targeted US military facilities in Bahrain and Kuwait, following US airstrikes on Iran that were carried out in response to attacks on oil tankers in the Strait of Hormuz.
The Dollar, often viewed as a global safe-haven currency, gave back part of its earlier advances as trading continued, Reuters reports.
For the time being, investors appear to believe that Tehran and Washington remain engaged in a strategic contest to strengthen their negotiating positions during the temporary ceasefire, with Tuesday’s incident unlikely to escalate into a broader military conflict, according to analysts.
Nevertheless, the episode underscored the ongoing risks surrounding the expiration of the interim ceasefire in mid-August, as well as persistent tensions over transit fees through the Strait of Hormuz.
Elsewhere, the New Zealand Dollar surged 0.5% to an intraday high of $0.5705 after the Reserve Bank of New Zealand raised its benchmark interest rate by 25 basis points to 2.5%, in line with market expectations, and indicated that additional monetary tightening may be necessary to keep inflation under control.
The Australian Dollar also advanced, gaining 0.2% to trade at $0.6943.
The Euro was little changed at $1.1415, while Sterling held steady at $1.3351. The US Dollar index, which tracks the greenback against a basket of six major currencies, slipped 0.1% to 101.05 after earlier touching its strongest level since 2nd July.
In Japan, the Yen edged closer to a fresh four-decade low after Bank of Japan board member Toichiro Asada, the only policymaker to oppose the central bank’s June interest rate increase, told Reuters that he would need clearer evidence of demand-led inflation before backing additional rate hikes.