Geopolitical tension, absolutely, is a factor. Israel and Lebanon moved the market for sure," said Amo Sahota, executive director at Klarity FX in San Francisco. "Oil prices rallied pretty significantly about 3%. They were down last Friday, so that recovery has benefited some currencies such as the yen, Swiss franc, and the Canadian dollar."
In afternoon trading, the U.S. dollar index, a gauge of the dollar's value against six major currencies, advanced 0.2% to 100.84, rising from its lowest since late December of 100.53.
Against the yen, the dollar was flat to slightly higher at 144.51. It earlier dropped to a three-week low of 143.45.
The euro fell versus the Japanese currency, down 0.1% at 161.45 yen, while the Swiss franc tumbled 0.7% to 169.97 yen.
Helen Given, FX trader at Monex USA in Washington, said overall the yen had gained more than the other safe havens, particularly against the dollar, as it continued to benefit from an expected U.S. interest rate cut next month, which was confirmed by Federal Reserve Chair Jerome Powell last Friday in a hawkish speech in Jackson Hole, Wyoming.
That prompted traders to seal bets of a 25 basis point (bps) rate cut in September and even boost expectations of a super-sized 50 bps rate cut.
"Powell comes in and sounds really quite alarmist, in a way, particularly his comments around employment reports," said Klarity's Sahota.
"His comments had nothing about slow, gradual rate cuts. He seemed to be giving an open letter to say that if data suggests, we will go hard and we will go fast."
The dollar recovered a bit against the yen after data showed U.S. durable goods orders surged 9.9% in July, after falling in June. However, non-defense capital goods orders excluding aircraft, a closely-watched proxy for business spending plans, dipped 0.1% after a downwardly revised 0.5% increase in June.#dollar
The euro eased 0.3% against the dollar to $1.1161. Sources told Reuters that ECB policymakers are lining up behind another rate cut on Sept. 12.s
