The sell-off of the ruble slows, the dollar continues to rise as the Ukraine crisis trades

Illustration showing Chinese yuan banknotes placed on top of US dollar banknotes
Chinese renminbi banknotes are shown on US Dollar banknotes in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/Illustration

March 1, 2022

By Kevin Buckland

TOKYO (Reuters) – The ruble managed to regain some stability on Tuesday after falling to an all-time low, while the US dollar continued to rise against major currencies as traders pause amid the rapidly unfolding Ukraine crisis.

A bit of calm has returned to currency markets since officials from Russia and Ukraine held the first round of cease-fire talks overnight, four days after Russia invaded its neighbour, allowing some moves. Major gains from the start of the week were withdrawn after multiple positions were taken by Shinichiro Kadota, senior FX strategist at Barclays in Tokyo.

“Who knows what will happen next: Russia might become more aggressive, or they might agree on something, although that can be very unpredictable,” Kadota said.

“Everybody’s just watching the headlines, but we’re at the point where, unless there’s some obvious negative news, the market is trying to stabilize a bit.”

The safe-haven yen and Swiss franc rebounded after their biggest gain in nearly seven weeks against the dollar on Monday.

The greenback rose 0.16% to 115.145 yen, after falling 0.47% overnight. It gained 0.20% to 0.9185 francs, after a 0.95% retreat on Monday.

The euro continued to fall, falling 0.25% to $1.1191, but bounced off a low of $1.1121 from the previous session.

The risk-sensitive Australian dollar fell 0.15% to $0.72525 after touching a nearly one-week high of $0.72670. The Reserve Bank of Australia stabilized its key interest rate at a record low on Tuesday, as expected, noting that the Ukraine conflict added a new source of uncertainty to the outlook.

The New Zealand dollar fell 0.35% to $0.6756.

The leading cryptocurrency bitcoin has rallied back towards $43,000 after jumping to a near two-week high above $44,000 late in the night.

The ruble started the week amid drama, falling as much as 30% to a record 120 per dollar after Western countries and their allies hit Russia with new sanctions including cutting some banks from SWIFT financial network. The currency has recovered somewhat from an emergency rate hike and other urgent measures adopted by the Russian central bank and last traded at 101.

Currency volatility was at a 14-month high on Monday, as measured by the Deutsche Bank index.

“News from Ukraine remains bleak,” Rodrigo Catril, senior forex strategist at National Australia Bank, wrote in a note. “The fighting rages on as the West seeks to intensify efforts to isolate Russia.”

The uncertainty will keep safe-haven currencies – including the dollar – bid and the euro under pressure, Catril said.

The dollar index, which measures the greenback against six major rivals, rose 0.15% to 96.885, but also bounced back from Monday’s high of 97.438.

The coin was supported by a tick in the US 10-year benchmark yields in Tokyo trading on Tuesday, after they fell to near-month lows overnight as investors looked the safety of bonds, even as the Federal Reserve is said to be certain to raise interest rates at its policy meeting next month. [US/]

The Ukraine crisis has seen traders bet on a 50 basis point rate hike on March 16, with odds currently at 11.4%, according to CME’s Fedwatch tool.

Atlanta Fed President Raphael Bostic on Monday said he did not rule out a half-point increase, though he favored a quarter-point increase, in the first comments by a Fed official since the conflict.

Commonwealth Bank of Australia strategist Joseph Capurso wrote in a client note: “Bottom line: don’t erase the 50bp gain.”

“USD’s short-term trend will be dominated by war, but USD’s mid-term trend will be determined by economic data.”

(Reporting by Kevin Buckland; Editing by Shri Navaratnam) The sell-off of the ruble slows, the dollar continues to rise as the Ukraine crisis trades

Caroline Bleakley

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