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Dollar falls as oil spills bring investors to safety

SINGAPORE (Reuters) – The dollar fell as oil-producing countries' safe havens and currencies rose Monday after an attack on Saudi Arabian refineries that disrupted global oil supplies and exacerbated tensions in the Middle East.

FILE PHOTO: The US dollar bills are curled and tested during production at the Bureau of Engraving and Printing in Washington on November 14, 2014. REUTERS / Gary Cameron / File Photo

Oil prices rise After strikes at two plants, including the world's largest oil refinery in Abqaiq, more than 5% of world oil supplies have been destroyed.

Yemen's Iranian-oriented Houthi group took responsibility for the damage, but the US has its finger directly on Iran.

Canadian dollar CAD = D3 rose 0.5% in morning trade in Asia to $ 1.3224 per dollar. The Norwegian krone NOK = rose by nearly 0.6% to 8.9363 per dollar.

Both currencies often move together with the price of oil because countries are the main exporters of oil.

The attacks erased strong risk appetite last week, prompting US President Donald Trump to tweet that the United States was "suspended and charged" for an answer.

The safe haven, the Japanese yen and the Swiss franc, gained at least 0.3% against the dollar. The yen JPY = EBS reached $ 107.60 per dollar and the franc CHF = touched $ 0.9871. Gold XAU = jumped by 1%.

Against a currency basket .DXY, the dollar fell 0.2% to 98,053.

"If that part of the reason for the decline in oil over the past week and the improvement in geopolitical risk sentiment was the news of John Bolton's dismissal … and the thought that this is a precursor to a kind of rapprochement between Trump and the Iran was, then it was no longer valid, "said Ray Attrill, head of FX strategy at the National Australia Bank in Sydney.

Apart from oil, foreign exchange markets this week are waiting for the results of central bank meetings in the US and Japan, as well as important economic data in Australia and New Zealand, which could determine the interest rate prospects in the antipodes.

Much of the risk appetite shown last week was due to signs of a thawing of trade between the US and China, as both sides offered olive branches in the run-up to next month's trade talks.

With few solid signs of progress, however, sentiment remains fragile.

"Geopolitical risks and central bank rhetoric remain the main risk drivers this week," analysts from the Australian and New Zealand banking groups said in a note.

In the United States, investors who had begun to lower expectations for a US Federal Reserve rate cut on Wednesday will drop certain interest rates and only argue about how much. FEDWATCH

Markets also expect the Bank of Japan to push interest rates further into negative territory. One in three economists interviewed by Reuters last week expects the incentives to increase.

Japanese markets are closed on Mondays on public holidays.

China's prime minister said on Monday that it was difficult to keep national economic growth above 6%, with protectionism balanced.

Monetary sales and manufacturing figures due on Monday are likely to give further insights into the health of the world's second largest economy. The Chinese yuan was flat in the morning trade before CNH.

The pound GBP = D3 held up last week's gains as fears that the UK might break out of the European Union without divorce treaties, while a Friday press release also raised hopes that a deal would end before 31 October could be completed. [19659004] At $ 1.2491, it was just below its high since July 25. Euro EUR = D3 was stable at $ 1.1077.

Reporting by Tom Westbrook; Edited by Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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