Safe-haven currencies, the U.S. dollar and the Japanese yen, rose on Monday as violence in the Middle East rattled the markets. The Israeli shekel fell by more than 3% early in the Asian session, almost reaching an eight-year low.
The Bank of Israel announced that it would sell foreign currency worth up to $30 billion in the open market to maintain stability.
Market sentiment shifted after Israeli forces clashed with militants from the Palestinian group Hamas over the weekend, an event not seen in Israel in the past 50 years. This held the Japanese yen, a traditional safe-haven currency, in demand, causing the risk-sensitive Australian dollar to drop by nearly 0.8%.
As expected, there is significant uncertainty in the markets this morning. Where there is a flight to safety, the U.S. dollar will remain in demand. The yen will also receive additional support.
In other countries, the U.S. dollar also gained overall, causing the British pound to fall by 0.31%. The euro lost 0.32%. The Australian dollar, seen as an indicator of risk appetite, fell by 0.59%, and the New Zealand dollar dropped by 0.36%. Demand for the U.S. dollar persists as a safe-haven.
Another rate hike by the end of the year is possible. However, market prices indicate that the probability of the Federal Reserve keeping rates unchanged at the November meeting is approximately 78%.
The table above shows the percentage change in the U.S. dollar (USD) exchange rate against major currencies today. The U.S. dollar exhibited the most weakness against the New Zealand dollar.