The dollar loses some of its gains, but Ukraine remains in focus

The Russian rouble recovered some ground on Friday, trading at approximately 84.4 per dollar after hitting a record low of 89.986 per dollar the day before as Russia launched its worst attack on a European state since World War Two.

The US, the European Union, and a number of other nations retaliated with a slew of penalties aimed at preventing Russia from transacting in major currencies, as well as restrictions against banks and state-owned corporations.

Fighting continued on Friday as Russian soldiers pushed into Kyiv, while markets were calmer than they had been in the previous 24 hours, with Asian stock markets climbing after Wall Street’s overnight gains.

The euro was last seen at $1.1218, up 0.24%, after falling to $1.1106 on Thursday, its lowest level since May 2020.

Other currencies regained their losses from the previous day, and the dollar index was down 0.2% at 96.854. However, because of the magnitude of earlier changes, it is still up 0.8% for the week.

“The conflict’s first-order impact is naturally in Russia and Ukraine… “- Riad Chowdhury, APAC head of MarketAxess, a fixed income trading platform, said there is an influence on Asia Pacific bond and foreign exchange markets as well.

Chowdhury saw a “flight-to-quality” movement in both global assets (shifting to the dollar and yen) and emerging markets.

Sterling, which jumped 0.4% to $1.343, the Australian dollar, which rose 0.46% to $0.7195, and the yen, which rose to 115.23 per dollar, were all part of Friday’s rally.

Currency dealers were attempting to estimate the war’s impact on monetary policy around the world, in addition to the immediate impact of the conflict in Ukraine.

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The situation in Ukraine could prompt the European Central Bank (ECB) to slow its withdrawal from stimulus measures, according to some policymakers at the European Central Bank (ECB), including some who are considered hawkish.

Meanwhile, investors and even US officials have predicted that the war will slow but not stop interest rate hikes.

At the Federal Reserve’s March meeting, policymakers have been publicly debating whether to start with a 25- or 50-basis-point rate raise.

“We expect the conflict’s ramifications to transfer into a less hawkish tone from major central banks, leaning the Fed toward a 25 basis point raise in March and putting the ECB on the fence,” Invesco strategists wrote in an email.