* Japanese yen hits 2-month high vs dollar
* Swiss franc surges to 4-month peak vs euro
* Stronger dollar pushes euro, pound lower
* GRAPHIC-World FX rates in 2019 - http://tmsnrt.rs/2egbfVh
By Olga Cotaga
LONDON, Jan 3 (Reuters) - Safe-haven currencies such as the
Japanese yen jumped to their highest in months on Friday after
U.S. air strikes on Baghdad airport killed a senior Iranian
military official, stoking tensions in the Middle East.
U.S. Treasuries, oil prices and gold rallied after an Iraqi
militia spokesman told Reuters that Iranian Major-General Qassem
Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis were
killed in the attack. The Pentagon confirmed the strike, saying Soleimani was
actively developing plans to attack Americans in Iraq and the
Middle East. The Japanese yen hit a two-month high of 107.92 against the
U.S. dollar and was last up 0.5% on the day. JPY=EBS
The yen is often seen as a haven from risk, given Japan's
status as the world's largest creditor nation. A holiday in
Tokyo also made for thin conditions, exaggerating the move.
The Swiss franc, another currency perceived as safe, surged
to a four-month high of 1.0824 against the euro. EURCHF=EBS
The U.S. dollar hit a one-week high versus the euro EUR=EBS .
10-year U.S. government bond yields fell to their lowest in
three weeks at 1.814%, after trading as high as 1.946% the day
before. Bond prices rise as yields fall.
Jeremy Stretch, head of currencies as CIBC, said the fall in
U.S. yields showed a reversal of the optimism seen on Thursday.
Market participants are now calculating the risk of
retribution from the Iranian side, he said. "We are still
waiting and watching to see whether there is going to be (the)
dynamic reaction that the initial headlines suggest."
A stronger dollar sent the pound down 0.2% to $1.3117
GBP=D3 and 0.1% lower against the euro at 85.10 pence
EURGBP=D3 .
Traders will be watching preliminary German inflation
numbers for December, due at 1300 GMT. Economists polled by
Reuters expect yearly inflation to have risen to 1.4% from 1.1%
the month before.
Preliminary data in France showed inflation beating market
expectations, rising to 1.6% from 1.2%. Polls had forecast an
increase to 1.4%.
An index of U.S. manufacturing activity is also due at 1500
GMT, but markets will be more interested in scrutinizing the
minutes from the Federal Reserve's last meeting in December.
Though the Fed has left interest rates unchanged, analysts
will look for clues on how the bank is looking to solve the
liquidity squeeze in the "repo", or repurchasing agreement,
market, CIBC's Stretch said.
Several Fed official are speaking on Friday, including
Governor Lael Brainard and the heads of the San Francisco,
Chicago, Richmond and Dallas banks.
Analysts expect they will stay upbeat on the economic
outlook and reiterate a steady outlook for rates.
Elsewhere, the Hong Kong dollar jumped to a 2-1/2-year high
of 7.7770 against the U.S. dollar HKD=D3 .
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