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US dollar edges higher on Syria

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US dollar edges higher on Syria

The conflict in Syria has overtaken monetary policy as the focal point in the global financial and currency markets. As the United States builds up support for a strike on President Bashar al-Assad’s forces, the currency markets favoured the US dollar in another day of risk-off trade.

The US dollar advanced more than 0.3 percent against a basket of its peers, sending the dollar index to 81.43. The US dollar gained broad support against all of its trade peers, as the currency market consolidates ahead of a potential strike on Syrian soil.

The US dollar edged off its early highs against the Canadian dollar, ending the day at 1.0487. The USDCAD has traded within a narrow range over the past five days, falling from a bullish run that took the pair to a high of 1.0565 on Friday. The pair is consolidating slightly below the 1.05 handle, and remains well supported in its current range as global risk sentiment wanes.

The euro resumed its downtrend against the greenback after a strong rebound earlier in the week, nearing the 1.33 support levels in the early New York session. The EURUSD pair recovered through initial bearishness to consolidate at 1.3340, representing a loss of more than 0.35 percent on the day.

In Asia, the US dollar made inroads against the yen, advancing more than half a percent to 97.6155. The yen failed to generate pullback amid a plunging stock market. The benchmark NIKKEI index declined more than 1.3 percent, largely a reflection of waning risk sentiment due to the prevailing conflict in Syria. Prior to Wednesday, the yen had enjoyed strong buy-in from risk-averse investors looking to flee stock market volatility. Over the past five days USDJPY has declined more than 1.1 percent.

Ongoing concern over Syria will make the US dollar the preferred safe haven until a resolution can be reached. According to the State Department, the United States will take action against Syria with or without UN approval. Russia has already objected to a UN resolution spearheaded by the UK, one of the United States’ key allies in the ongoing fight for Syria.

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