August 27, 2013 / 1:27 PM / 4 years ago

FOREX -Yen, Swiss franc rise as Syrian tensions escalate

* Yen sharply higher vs Australian and New Zealand dollars
    * Swiss franc also rises versus euro, dollar
    * Emerging market currencies in rout on Syria tension
    * German IFO survey has little impact on euro/dollar

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 27 (Reuters) - The safe-haven yen and Swiss
franc gained on Tuesday and riskier currencies like the
Australian and New Zealand dollars fell as geopolitical tensions
rose with Western countries poised to take  military action
against the Syrian government.
    Economic reports such as an upbeat German business sentiment
survey have largely been ignored with investors focused on
conflict in the Middle East. 
    Western powers told the Syrian opposition to expect a strike
against President Bashar al-Assad's forces within days,
according to sources who attended a meeting between envoys and
the Syrian National Coalition in Istanbul. 
    "Coming within the current nervous state of the markets, any
flare-up or intensification of Middle Eastern tensions will
surely take a further toll on risk sentiment," said Marc
Chandler, global head of currency strategy at Brown Brothers
Harriman in New York.
     The Swiss franc and the yen usually climb in times of
financial market stress and geopolitical uncertainty while
growth-linked higher-yielding currencies are sold off.
    The dollar extended losses to fall 1.1 percent versus the
yen to 97.43 yen, pulling away from a near three-week
high of 99.15 yen set on Friday. The euro also struggled against
the yen, falling 1.3 percent to 129.98 yen.
    The dollar fell 0.2 percent against the Swiss franc 
to 0.9210 francs, while the euro was down 0.4 percent at 1.2288
    German, U.S. and British government bond prices all rose as
money flowed in to safe-haven markets. On the other hand, stocks
 were lower as were emerging market assets.
    The growth-linked Australian dollar was down 0.8
percent at US$0.8957, while against the yen it lost 1.8 percent
to 87.32 yen. The New Zealand dollar fell 1.9 percent
against the yen to 75.81 yen.   
    Washington said on Monday it believed Syrian President
Bashar al-Assad was responsible for a chemical weapons attack on
civilians last week in what U.S. Secretary of State John Kerry
called a "moral obscenity." 
    Emerging market currencies tumbled, with the Indian rupee
hitting a record low and the Russian rouble, the Indonesian
rupiah and a host of others recording multi-year troughs.
    The rising tension stemming from Syria overshadowed the
impact from positive data from the euro zone.
    The IFO German confidence survey showed business sentiment
was at its highest level in 16 months but that had only a
fleeting impact on the euro. 
    "IFO beat expectations with both the current assessment and
forward-looking expectations better than expected," said Elsa
Lignos, senior currency strategist at RBC Capital. "The effect
was lost in the general safe haven rally, taking euro/dollar
down to a low of $1.3322."
    The euro was last down 0.2 against the dollar at
    Data due later from the United States includes consumer
confidence and the Richmond Fed survey. 
    Disappointing U.S. data in the past two trading sessions,
including one which highlighted the fragility of the housing
sector, have weighed on the dollar, although buying at
lower levels has checked sharp losses.
    The dollar index was last little changed at 81.412.

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