The rouble fell further today after partly recovering some ground, while the dollar edged higher and the Swiss franc hit a seven-year high, as investors sought out the safe-haven currency while waiting for developments in Ukraine.
Financial markets have been rocked in recent days by Russia’s invasion of Ukraine, the biggest assault on a European state since World War Two, and the resulting Western sanctions which include cutting off some Russian banks from the SWIFT financial network and limiting Moscow’s ability to deploy its $630 billion of foreign reserves.
Global stock markets initially showed signs of regaining their composure today, but by 1152 GMT European indexes and Wall Street futures were firmly in the red.
The rouble was down around 4% on the day, trading at 97.036 per dollar, a day after it collapsed to a record low of 120 per dollar. Earlier on Tuesday it had recovered some of those heavy losses, helped by an emergency rate hike by Russia’s central bank.
Still, the rouble was down almost 30% from its best levels this year.
The US dollar, which surged last week on safe-haven flows, continued to climb, leaving the dollar index up 0.2% at 96.96.
The euro was down 0.4% on the day at $1.1175.
Neil Jones, head of FX sales at Mizuho, said that investors were watching the rouble and using that to determine the direction of other currencies.
“Rouble is the barometer which the rest of the foreign exchange market follows right now,” Jones said.
The safe-haven yen was around 0.2% stronger against the dollar, at 114.790.
Meanwhile, the Swiss franc hit its strongest level since 2015 against the euro, with the pair last at 1.0248.
Mizuho’s Jones said some investors were disappointed that the yen had been underperforming the Swiss franc as a safe-haven currency, and suggested one reason may be that Japan has higher energy demands – and buying energy involves selling the yen to buy dollars, which puts depreciation pressure on its currency.
The Swiss National Bank’s sight deposits were little changed in February, suggesting the central bank may have given up its attempts to slow the franc’s appreciation.
Currency volatility was at its highest since late 2020, as measured by a Deutsche Bank index.
“Today, the focus will be on whether sanctions/retaliation will start impacting the commodity flows from Russia, and whether (Russia’s central bank) will step in with more measures to support the rouble,” ING FX analysts wrote in a note to clients.
Among the G10 currencies, Sweden’s crown, the euro and Britain’s pound could suffer the most if sanctions affect the flow of Russian gas into Europe, they said, while Norway’s crown may keep benefiting from high gas prices.
The Australian dollar hit its highest since mid-January in early trading, before easing to trade up 0.1% on the day at $0.72715, its third consecutive day of gains.
Australia’s central bank on Tuesday held interest rates at a record low and cited the war in Ukraine as a major new source of uncertainty as it stressed patience on tightening policy.
The New Zealand dollar was steady at $0.67755.
Some of the demand for Australian and New Zealand dollars may be due to geography, with the countries far away from the troubles in Europe and little exposed to Russian trade.
Bitcoin jumped sharply late on Monday to briefly hit a 12-day high above $44,000.
Accreditation: Reuters
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