FOREX-US dollar lifted by safe-haven bids as MidEast conflict escalates

By Chibuike Oguh and Gertrude Chavez-Dreyfuss

NEW YORK, June 13 (Reuters) - The U.S. dollar advanced against major currencies, including the euro and yen, on Friday as markets grabbed safe-haven assets as geopolitical tensions in the Middle East following an Israeli attack on Iran.

Israel launched a barrage of strikes across Iran on Friday, attacking nuclear facilities and missile factories and killing a swath of military commanders. In retaliation, Iran's state news agency IRNA said hundreds of ballistic missiles had been launched.

U.S. President Donald Trump, Israel's main ally, urged Iran to reach a deal on its nuclear program, suggesting that Tehran had brought the attack on itself by resisting a U.S. ultimatum in talks to restrict its uranium enrichment.

In afternoon trading, the dollar gained 0.3% to 143.88 against the Japanese yen JPY=EBS and rose 0.1% to 0.8110 franc against the Swiss currency CHF=EBS, with the greenback on track to snap two straight sessions of losses against safe-haven currencies.

"Historically speaking with these kinds of geopolitical events, you get the knee jerk reaction from the market ... History tells us to kind of look past a lot of this stuff," said Jack Janasiewicz, portfolio manager, at Natixis Investment Managers in Boston.

"There's a couple of things worth highlighting. How long does this operation go for? The longer this goes, obviously the worse it gets for confidence and that eventually will start to weigh on the market."

The dollar is still poised for a weekly loss against both the yen and the franc, with markets worried about Trump's tariffs. The greenback was down nearly 1% versus the yen, on track for its largest weekly fall since mid-May.

Against the Swiss franc, the dollar fell for a second straight week.

"This (Israel-Iran conflict) just landed on us but the main concern remains tariffs and obstacles to global trade," said Juan Perez, director of trading at Monex USA in Washington.

"When you actually have a physical situation and potential for armed conflict to be prolonged and to escalate, the U.S. dollar and gold jump into safe-haven assets. It's a bit of a psychological reaction."

The euro meanwhile, was down 0.4% at $1.1539, on track to snap four straight sessions of gains. It was on pace, however, for a second consecutive weekly rise against the dollar.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, climbed 0.5% to 98.2, snapping two straight sessions of losses. It is still set for a second consecutive week of losses.

Gold prices jumped amid safe-haven demand. Spot gold XAU= rose 1.6% to $3,437.21 an ounce. Oil prices jumped to multi-month highs, buoyed by the Israeli-Iran conflict. U.S. crude futures surged more than 8% CLc1 to $73.76 per barrel.

Amid the Middle East conflict, investors largely ignored data which showed U.S. consumer sentiment improved for the first time in six months in June. The University of Michigan Surveys of Consumers on Friday said its Consumer Sentiment Index jumped to 60.5 this month, exceeding a Reuters poll of economist expectations.

"It's difficult to fix every single item that we are facing this year that has crushed the market's ability to believe in the U.S. dollar," Monex's Perez said.

"But at the same time, when it comes to the military and physical aggression or armed conflict, it seems like globally there's still a consensus that you should jump towards historically the safest assets, which is the U.S. dollar as a currency and gold as a commodity to hold on to."