January 8, 2020 / 12:36 AM / 18 days ago

FOREX-Mideast conflict drives yen back to three-month high

* Pentagon says Iran strikes U.S. forces in Iraq

* Yen jumps back to three-month peak

* Gold leaps higher

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

By Tom Westbrook

SINGAPORE, Jan 8 (Reuters) - The safe-haven Japanese yen jumped and gold shot higher on Wednesday after a rocket attack on a base hosting U.S. troops in Iraq renewed fears of a broader conflict breaking out in the Middle East and sent investors rushing to safety.

Rockets were shot at multiple targets including Iraq’s al Asad airbase, which hosts U.S. forces, U.S. officials told Reuters, speaking on condition of anonymity.

The Pentagon said the missiles were launched from Iran, while Iranian news agency Mehr reported the attack was launched by Iran’s Islamic Revolutionary Guard Corps.

The attack happened hours after the funeral service of an Iranian military commander, whose killing in a U.S. drone strike in Baghdad last week has plunged the Middle East into a new crisis and stoked fears of a wider conflagration.

The yen, regarded as a haven in times of turmoil by virtue of Japan’s status as the world’s biggest creditor, rose 0.6% to a three-month high of 107.74 yen per dollar.

Shares slid and gold jumped $18 an ounce to $1,592.50 per ounce, its highest since 2013. Oil erased recent losses on fears any conflict in the region could disrupt global supplies.

“It’s quickly put the markets into risk-off,” Ashley Glover, Head of Sales Trading for Asia-Pacific at brokerage CMC Markets in Sydney.

“Now it’s going to be a wait-and-see mode initially,” he said, as traders watch for the United States’ next move.

“It’s only early Asian trading at the moment, so there’s a lot more liquidity to come on, and once we see what further retaliation there is.”

It was not immediately clear what the extent of damage or casualties was at the base.

U.S. President Donald Trump has been briefed on the attack in Iraq and was monitoring the situation, White House spokeswoman Stephanie Grisham said.

U.S. Defense Secretary Mark Esper had said the United States should anticipate retaliation from Iran over the killing of elite Quds Force commander Qassem Soleimani in Iraq.

Soleimani, a pivotal figure in orchestrating Iran’s long-standing campaign to drive U.S. forces out of Iraq, was also responsible for building up Tehran’s network of proxy armies across the Middle East.

A senior Iranian official said Tehran was considering several scenarios to avenge his death. Other senior figures have said the Islamic Republic would match the scale of the killing when it responds, but that it would choose the time and place.

Safety flows also buoyed the Swiss franc 0.3% higher to 0.9674 francs per dollar, and supported the greenback which had also revived overnight on the back of strong U.S. data.

The dollar rose 0.3% on the New Zealand dollar and hit a three-month high against the Aussie, which has been sliding as markets begin to wager that the economic toll of wildfires sweeping the country could force a rate cut. (Reporting by Tom Westbrook. Editing by Lincoln Feast.)

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