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Currency Market Analysis

Jan 06, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar headed south amid rising tensions in the Middle East. The greenback favored multimonth lows against the euro and yen, and kept within sight of year-plus lows against rivals from Canada and Switzerland. Some emerging markets also rose against their U.S. counterpart, underscoring a softening in dollar sentiment. Markets are on edge about possible repercussions from worsening tensions between Washington and Tehran after the former killed the latter’s top military official. The specter of increased instability in the Mideast bodes favorably for classic havens like U.S. government bonds and gold. Also in focus for the greenback this week are top tier data like Friday’s December jobs report.


The yen steadied after a flirt with three-month highs. Middle East turmoil spurred a flight to safer ground such as the Japanese currency. The tensions between Washington and Tehran have bolstered the short run prospects of haven currencies like the yen and Swiss franc.


The euro climbed to within a half-cent of five-month peaks against the greenback. While the euro shed more than two cents against the dollar in 2019, it closed out December on a tear that hoisted the single currency to five-month peaks thanks to easing concerns about the U.S.-China trade war. 


Canada’s dollar strengthened toward 14-month highs, boosted by oil’s climb to April 2019 peaks above $63. But an unsettled backdrop in the Middle East could cap gains for the risk sensitive Canadian currency. Canada on Friday releases critical employment data that’s considered a key gauge of strength in the domestic economy. Forecasts call for hiring to rise for the first time in three months with an expected increase of 25,000 in December. A bounce back in hiring could buy more time for the Bank of Canada to keep lending rates unchanged, a factor that helped propel the Canadian currency’s winning year in 2019.

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