Trump suggests regime change in Iran following U.S. strikes on nuclear sites

The dollar index was up at one point on Monday indicating a gain against a basket of currencies However a growing consensus among outlay banks suggests the dollar s strength may prove temporary Analysts say the dollar rally is masking concerns over U S fiscal agenda transaction wars and weakening international demand for U S assets The U S dollar surged in early trading on Monday benefiting from its traditional safe-haven status after U S military strikes on Iran but analysts are warning the gains may be short-lived The dollar index was up at one point indicating a gain against currencies such as the Japanese yen the euro and the British pound as well as the Canadian Australian and New Zealand dollars The greenback was last seen trading around higher at a m London time The escalation of the Middle East emergency after the US attacks Iran during the weekend is expected to lead to chosen of the traditional safe haven effects in the domain such as the oil price is rising lower equity prices and a stronger dollar stated Kirstine Kundby-Nielsen fixed income and currency research at Danske Bank Despite the initial rally a growing consensus among commitment banks suggests the dollar s strength may prove temporary Specific analysts say the Middle East conflict is merely masking concerns over U S fiscal program transaction wars and weakening international demand for U S assets which are likely to regain focus once the immediate crisis-driven demand fades The dollar index is down more than this year reflecting the long-term concern The U S dollar s immediate strength is tied to fears of how Iran might retaliate with a closure of the Strait of Hormuz a waterway vital to the transit of oil at the top of those concerns Yet RBC Capital Markets analysts caution that the situation is more complex noting that Iran has asymmetric capabilities to strike individual tankers and key ports Hence we do not believe it is a full closure or nothing scenario when it comes to the waterway and Iran may deploy their asymmetric capabilities to raise the economic cost of the combined US Israeli operations stated RBC s Halima Croft a former CIA analyst in a note to clients Jordan Rochester head of FICC strategy for the EMEA region at Mizuho also expressed various optimism when it came to the possibility of a Strait of Hormuz closure It s a bold call but I doubt the strait of Hormuz is blocked and we avoid the - pb oil levels touted by the sell side with Iranian allies such as China likely to be applying pressure to keep oil flows ongoing he declared in a Monday morning note The US is also likely to have made ability infrastructure a red line attached to its help of Israel However a key indicator of safe-haven demand the U S Treasury industry appears to be telling an entirely different story through its unusually muted reaction A global situation typically sends investors flocking to U S cabinet debt but Danske Bank s Kundby-Nielsen reported the impact on US Treasuries is a bit more uncertain given the critical bargain deficit and tariffs combined with a prospective increase in the supply of Treasuries given the soft fiscal procedures A global contract war is compounding these fiscal concerns With a July deadline approaching until a reprieve on levies expires the U S is threatening tariffs of up to on bulk imports from the European Union As far as the USD goes we d suspect that the USD would be sinking lower if it weren t for the War largely because the news pertaining to US import tariffs is not particularly good and because figures from outside the US while weak does not point to further deterioration relative to the US revealed Thierry Wizman and Gareth Berry Macquarie s currency and rates strategists in a June note to clients that preceded the U S strike on Iran FX strategists from Bank of America also point out that investors are betting heavily on the decline of the U S dollar which adds momentum to any downward move for the currency According to the BofA global fund manager survey issued on June fund managers at this moment see short-U S dollar as the third greater part crowded contract although the survey was carried out before to the United States involvement in the Middle East conflict