The Israeli-Palestinian Conflict Heats Up, Safe Haven Trengginas
Market risk appetite wavered due to heated armed clashes between Israel and Palestine. Dollars, gold and yen immediately rose in popularity.
The value of various safe haven assets increased in trading earlier this week (9/October). Market players tend to seek safety amidst the heat of armed clashes between Israel and Palestine. XAU/USD suddenly jumped around 1% to the 1850s range, while the US Dollar Index (DXY) rose around 0.4% to the 106.50s.
Hamas launched a massive land, air and sea attack on Israel last weekend. Palestinian fighters tore down the border fence in the Gaza Strip that had confined millions of its residents in "the world's largest open-air prison" for years, then took over a number of areas from Israeli occupation for the first time in history.
Israel immediately deployed dozens of fighter jets and mobilized 100,000 reserve troops. Retaliatory attacks collapsed various buildings in the Palestinian area and killed hundreds of residents.
The BBC reported that more than 700 people were killed in Israel and more than 400 people were killed in Gaza, while thousands of others were injured. AlJazeera called the Hamas attack this time "the biggest military challenge Israel has faced since 1973 when Egypt and Syria tried to take back their territories occupied by Israel in 1967".
The armed conflict has the potential to spread after clashes broke out between Israel and Hezbollah in Lebanon on Sunday. Israel launched the attack, because Hezbollah claimed to have launched rockets into "occupied Lebanese territory" in solidarity with Palestine.
This situation shakes market risk appetite, thus increasing the prestige of safe havens. Apart from that, the US dollar was also supported by the release of good Nonfarm Payroll data on Friday.
“As you might expect, there is a lot of uncertainty in the market this morning,” said Tony Sycamore, market analyst at IG Australia, as reported by Reuters, “When some of this risk aversion occurs in the (currency) space, the dollar will remain bought. .(and) the yen will start to receive more support, but that (support) is more in the cross currency pairs."
The yen is known as a safe haven asset, but its position tends to be under pressure because the Japan-US interest rate gap is too large. The safe haven duo USD/JPY was almost flat in the range 149.15-149.30 in Asian trading session. Meanwhile, GBP/JPY and EUR/JPY each slumped around 0.5%.
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