(New throughout; changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, Jan 3 (Reuters) - Investors rushed into safe-haven
assets on Friday after U.S. air strikes in Iraq killed a senior
Iranian military official, sending the Japanese yen to a
two-month high, while the weakest U.S. factory activity in a
decade sent the dollar reeling.
In addition to the yen, U.S. Treasuries, German bunds and
gold rallied after the overnight air strike in Baghdad killed
Qassem Soleimani, commander of Iran's elite Quds Force and
architect of its growing military influence in the Middle East.
"Overall, geopolitical risk premia have risen substantially
overnight. You're looking at inflows into the U.S. dollar, Swiss
franc, Japanese yen - investors really looking for safe havens
and a port in the storm," said Karl Schamotta, chief market
strategist at Cambridge Global Payments.
The U.S. dollar index .DXY initially benefited from the
move into safe-havens, but those gains were erased after the
report of a contraction in the manufacturing sector in December.
It was last unchanged on the day at 96.846.
The Japanese yen JPY= had risen as high as 107.91 per
dollar and was last up 0.54% on the day at 108. 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 attack sparked concerns about crude supply disruptions,
lifting oil prices more than $3. Petrocurrencies gained slightly
on the higher crude prices, but those were then largely offset
by the overall move away from risk, said Schamotta. The U.S. manufacturing sector contracted in December by the
most in more than a decade, with order volumes crashing to a
near 11-year low and factory employment falling for a fifth
straight month, according to a report from the Institute for
Supply Management released on Friday. "That is a depressing number," said Schamotta.
It suggests "trade war-related uncertainty has actually
damaged the manufacturing sector on a sustained basis and that
points to weakness in GDP, particularly in the coming quarter
because what you're likely to see is an inventory drawdown as
opposed to continued build."
The longer-term effects on the dollar are unclear. Though
down on Friday, the greenback may ultimately benefit if weak
U.S. manufacturing dents hopes for global growth in 2020.
"The idea that other countries that are large exporters to
the U.S. might see a large rebound in the near term - that idea
is losing traction here," said Schamotta.
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Japanese yen surges to 2-month high vs dollar https://tmsnrt.rs/2tpxnEZ
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