* Iran launches missiles at US-led forces in Iraq
* Japan’s yen jumps to 3-month high before retreating
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
By Dhara Ranasinghe
LONDON, Jan 8 (Reuters) - Currencies whipsawed on Wednesday, with the safe-haven Japanese yen and Swiss franc initially jumping after Iran fired rockets at U.S. forces in Iraq, before they retreated on a perception that the strikes would not lead to a wider regional conflict.
Iran said it had fired 15 missiles at U.S. targets in Iraq early on Wednesday in retaliation for last week’s U.S. drone strike that killed Iranian commander Qassem Soleimani, stoking fears of a new war in the Middle East.
The Japanese yen initially jumped to three-month highs against the dollar before retreating, with the absence of immediate reports of casualties steadying nerves.
Twitter posts from both sides playing down the prospect of further escalation also helped calm currency markets.
U.S. President Donald Trump tweeted that a damage assessment was “So far, so good!” and said “all is well”, promising a further statement on Wednesday. Iranian Foreign Minister Mohammad Javad Zarif tweeted that the attack was “proportionate” and that “we do not seek escalation or war”.
Iraq’s military said there were no casualties among its forces.
“News that Iran had launched ballistic missiles at two bases that house U.S. troops in Iraq sparked an immediate sell-off in risk,” said Adam Cole, chief currency strategist at RBC Capital Markets, referring to a fall in dollar/yen and a spike in crude oil prices.
“However, a growing sense that this will be the full extent of Iranian retaliation has seen both moves fully reverse and G10 currencies are back to close to where they closed yesterday.”
The yen, regarded as a haven in times of turmoil by virtue of Japan’s status as the world’s biggest creditor, was virtually unchanged on the day at 108.41 per dollar.
That stabilisation followed a spike of as much as 0.8% to a three-month high of 107.65 yen per dollar.
The Swiss franc similarly gave back gains and so did gold, by a lesser extent.
Switzerland’s currency was steady at 0.9707 francs per dollar, having briefly jumped around 0.4% to one-week highs.
The franc was also steady against the euro. “If the market was really worried that the end of the world was nigh, dollar/yen would have collapsed, and that’s clearly not been the case,” said Stuart Oakley, global head of flow FX at Nomura in Singapore.
Investors’ focus will now be on what response, if any, the United States is planning.
Elsewhere, China’s yuan, held on to most of Tuesday’s steep gains at 6.9460 per dollar, after a bumpy ride.
Against other major currencies, the dollar was mostly steady, with the euro hovering around $1.1152.
The greenback had been buoyed on Tuesday by a strong showing in a non-manufacturing business survey, released ahead of Friday’s key U.S. jobs report. (Reporting by Dhara Ranasinghe; Additional reporting by Tom Westbrook in Singapore; Editing by Gareth Jones)