The euro’s one-month volatility level jumped to a 15-month high on Tuesday as the single currency was hit by growing risk aversion amid soaring gas prices and escalating tensions in Ukraine.
Russian President Vladimir Putin ordered troops into two breakaway regions of Ukraine, sending the euro’s month-long volatility to its highest level since November 2020, as the West promised sanctions in response to Putin’s troops in Ukraine. The euro edged up 0.2% against the dollar to $1.1331 at 0910 GMT, after hitting an eight-day low.
“Soaring gas prices in Europe and rising concerns about Russian supplies in the region pose a risk to growth in Europe and therefore have the potential to have a significant impact on the timing of policy tightening. ECB (European Central Bank) in the future, which is a negative EUR factor,” said Jane Foley, head of FX strategy at Rabobank in London. As Putin’s move accelerated a crisis the West feared could trigger a major war, the Russian ruble rallied above 80 to the dollar to its highest level since November 2020. The Ukrainian hryvnia fell 1% to reach its lowest level in seven years.
In the meantime, safe-haven currencies were in demand. The yen hit a nearly three-week high and the Swiss franc against the dollar remained close to a one-month high reached on Monday. The yen edged up around 0.1% to 114.8 after briefly touching 114.50 to the dollar, while the Swiss franc slipped 0.4% against the euro to 1.039, after hitting a low. 1-month high at 1.0339 against the single currency.
The euro’s return to below 1.04 against the Swiss franc confirmed market concerns that any escalation in the Ukraine crisis would weigh on the euro zone, analysts said. “While there is already a lot of bad news priced in, tensions in Ukraine have the ability to push EUR/CHF back to the recent low of 1.03,” Rabobank’s Foley said.
Another safe haven, the US dollar edged down 0.1% to 96.013 against a basket of currencies including the euro, as investors await further developments in the crisis. The United States and its European allies are set to announce sanctions against Russia on Tuesday.
Cryptocurrencies were also under pressure, with bitcoin falling to a nearly three-week low of $36,370.
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