Threat of war in Syria giving a boost to the US dollar

August 27, 2013 in Forex Articles

Geo-political concerns in the Middle East and rising tensions in Syria have given a boost to the US dollar against Sterling this morning. Sterling was trading above 1.57 USD last Wednesday and is now nearer the 1.55 USD level as the “flight to safety” has given a boost to the greenback. Continued weakness in emerging market currencies such as the Turkish Lira (due to its proximity to Syria) and Indian rupee is also giving a boost to the US dollar.

With the crisis in Syria getting worse and worse and the veiled threat from the US Secretary of State, John Kerry yesterday the threat of war seems to be increasing. With the US and UK on one side and the Russian and Chinese on the other, this is extremely serious.

The US dollar has been unloved and neglected since the beginning of July and perhaps  the US Secretary of State John Kerry’s quote, in the most forceful reaction yet to the August 21 gas attack outside Damascus, said President Barack Obama “believes there must be accountability for those who would use the world’s most heinous weapons against the world’s most vulnerable people.”

The Euro has been remarkably strong but the European single currency has also begun to show some weakness today from the fundamentally over-valued position it currently holds. With the Euro still above 1.3350 against the US dollar, there is plenty of room for a further correction not just due to the threat of war in Syria but also nervousness ahead of the German elections next month and the extremely high unemployment rate in Southern Europe.

Is this the turning point for the US dollar?

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