Foreign Exchange Market: Funds Urgently Seeking "Safe Havens" as Global Currency Markets Diverge

MaticHoleFiller · 2026-03-15T05:56:31+00:00

Recent U.S. and Israeli attacks on Iran have led to increased risk aversion in global financial markets, with safe-haven currencies such as the U.S. dollar and Swiss franc appreciating, while emerging market currencies face pressure. Analysts predict that safe-haven assets will benefit in the short term, but the U.S. dollar may face downward pressure in the medium to long term. Rising oil prices could trigger inflation risks, affecting monetary policies across countries. Markets expect that the upcoming central bank interest rate decisions from various countries will have significant implications for future policy directions.

MaticHoleFiller

2026-03-15 05:56:31

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◎ Reporter Chen Jiayi

The U.S. and Israel’s attack on Iran has become a “black swan” disrupting global financial markets. Global funds quickly shifted to safe-haven mode, causing divergence in the foreign exchange market. The dollar, Swiss franc, and other currencies rose, while emerging market currencies came under pressure.

Analysts believe that in the short term, assets and currencies related to risk aversion may benefit, which could strengthen the US dollar index. In the medium to long term, if tensions in the Middle East persist, US fiscal pressure may increase, and US dollar creditworthiness could be damaged, potentially leading to a deep decline in the dollar.

As of 3:00 a.m. Beijing time on March 2, the US dollar index opened higher and broke above 98. By 5:10 p.m. Beijing time, the dollar index reached a high of 98.5690, with an intraday increase of nearly 1%.

As a traditional safe-haven currency, the Swiss franc also attracted capital inflows. On March 2, the euro/Swiss franc exchange rate briefly fell to its lowest level in over 10 years, closing at 0.9059 as of 5 p.m. Beijing time. Morgan Stanley previously stated in a report that the Swiss franc “is the most broadly tested safe-haven currency.”

Meanwhile, emerging market currencies faced significant pressure. For example, the Thai baht fluctuated lower on March 2, reaching 31.4280 baht per US dollar by 5 p.m. Beijing time, down over 1% intraday.

Looking ahead, analysts generally believe that the Middle East situation remains highly uncertain, and markets may continue to experience high volatility. In the short term, risk aversion sentiment may not fully subside, and currencies like the dollar could continue to strengthen.

CICC’s research report suggests that the US dollar index may strengthen in the short term. Currencies and assets benefiting in the short term include gold and the Swiss franc, as well as the Canadian dollar and Norwegian krone, which benefit from rising oil prices.

Standard Chartered China’s Chief Investment Strategist Wang Xinjie said that safe-haven currencies like the Swiss franc and Japanese yen are also expected to see slight gains, while Asian oil-importing currencies may weaken in the short term.

However, from a medium to long-term perspective, the US dollar’s short-term safe-haven advantage may not last. Huatai Securities’ research indicates that although the dollar has some safe-haven properties in the short term, the US is at the “epicenter” of global geopolitical shifts. The accelerated restructuring of the global order will continue to weaken the dominance of the dollar and dollar assets in the medium to long term. The recent US-Israel attack on Iran will further erode confidence in the dollar system, and the trend of de-dollarization worldwide may continue.

Beyond emotional shocks, the ongoing tension in the Middle East could impact the global energy supply chain. Data shows that on March 2, international oil prices opened higher, with Brent crude surging about 13% to $82 per barrel, and WTI crude initially rising to $75 per barrel.

Markets worry that rising oil prices could reignite inflation, disrupting the monetary policies of various countries. “For the US, if oil prices soar, although it benefits oil-exporting countries, domestic prices and inflation risks could cloud economic prospects, and the Federal Reserve may continue to delay rate cuts,” said J.P. Morgan senior analyst Jerry Chen.

Research from Dongwu Securities states that in the medium to long term, if the situation spirals further out of control—especially if the Strait of Hormuz remains blocked—this could repeat the supply shock that caused oil prices to surge, leading to inflation spikes and forcing major central banks worldwide to raise interest rates to curb inflation.

On March 19, the Federal Reserve, Bank of Japan, Swiss National Bank, Riksbank of Sweden, Bank of England, and European Central Bank will announce their latest interest rate decisions. Their analysis and judgments on geopolitical issues, macroeconomic conditions, and inflation will be key references for investors to gauge their policy paths.

Latest forecasts show that investors are reassessing the Federal Reserve’s rate cut trajectory. The CME FedWatch Tool indicates that investors have reduced their bets on a rate cut in June, with the probability of holding rates steady in June now at 52.1%, up from 42.7% on February 27.

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