The dollar rose because of the attacks by Israel and Iran. Whether the currency remains a «safe haven» for investors

The dollar's traditional role as a «safe haven» for investors will be put to the test if the conflict between Israel and Iran escalates further, Bloomberg says. On Friday, the U.S. currency was climbing following the Israeli strikes and Iranian drone attack - but that may be partly due to a sharp rise in oil prices. A day earlier, the dollar had fallen to its lowest level in three years.

The dollar's exchange rate on Friday deviated from its usual dynamics in crisis moments: it initially declined after the first reports of an Israeli strike on Iran, and only after some time went to its usual rapid growth in such situations, wrote Bloomberg. At one point, the U.S. currency was up nearly 0.6 percent, reports Reuters. The rally may have been helped by a rise in the cost of oil, rather than interest in the dollar as a defensive asset: Texas Intermediate WTI futures on Friday were up 10% at the moment, Bloomberg suggested. Reuters, however, linked the rate hike to investor interest in safe-haven assets, including gold.

«[The dollar's rise on Friday] has less to do with [investors'] influx into safe haven assets than the fact that the U.S. is the world's largest oil producer,» said Bloomberg Markets Live strategist Mark Cudmore. City Index strategist Fiona Cincotta disagreed: «The dollar is returning to its traditional safe haven role, which we haven't seen in months. It's being driven by headlines. And I think, obviously, next week we're going to get a Fed rate decision, so the momentum could be short-lived if the escalation [between Israel and Iran] comes down over the weekend,» she noted.

A new round of escalation in the conflict between Israel and Iran will be a test for the dollar's status as a «safe haven» for investors, says Bloomberg. The Israeli attack came before the planned sixth round of talks between the US and Iranian delegations on Iran's nuclear program. U.S. President Donald Trump said earlier this week that his confidence in a deal had diminished.

«Clients are increasingly asking and discussing the dollar's role as a safe haven in portfolios. Depending on how the Trump administration signals its stance on the attacks - for example, by signaling its involvement in the future - there are risks that treasuries and the dollar could face further sell-offs,» noted Mizuho Securities strategist Seki Omori as outlined by Bloomberg.

The Swiss franc and Japanese yen also rose initially on Friday, but then lost ground to the dollar, noted Reuters.

A day earlier on Thursday, the dollar fell to its lowest level in three years as the U.S. currency was pressured by investor concerns about import duties and the outlook for the U.S. economy, wrote Bloomberg. By contrast, the British pound then rose to its highest in three years and the euro in four years.

«Safe haven status - for assets such as the dollar and the [Japanese] yen - is based on three principles: economic stability, liquidity and reliability. This year's dollar weakness reflects cracks in all three,» Vantage Markets analyst Hebe Chen said in a Bloomberg statement.» said Vantage Markets analyst Hebe Chen.

The dollar has suffered from the widespread «sell America» tactic, which has also affected other U.S. assets from stocks to U.S. Treasury Department government bonds and has also raised questions about the dollar's status as a safe haven for investors, Bloomberg noted.

«One topic to watch is whether the dollar's safe haven advantages are being eroded by the US administration's trade policies, fiscal profligacy and its challenge to the rule of law,» noted National Australia Bank strategist Rodrigo Catheril. Another issue that is surfacing in light of the Israeli strikes shows that the U.S. appears to be moving away from a leading geopolitical role, which opens the door for others to pursue their goals, he added.

Before the escalating conflict between Israel and Iran, major Wall Street banks confirmed their forecasts that the dollar could weaken further if U.S. interest rates are cut and global economic growth slows, Bloomberg writes.