Euro off 22-month lows as Ukraine crisis grips

London

THE euro edged up from 22-month lows on Tuesday (Mar 8) as war in Ukraine darkens Europe's economic outlook, while currencies sensitive to soaring commodity prices were volatile.

Russia's invasion of Ukraine has led to increased demand for assets seen as safer across markets, with the US dollar - the world's reserve currency - up around 3 per cent over nearly 2 weeks as the crisis has intensified. Russia's offensive in Ukraine continued on Tuesday but at a slower pace, and Ukraine said it had begun evacuating citizens from some of its besieged cities. Russia calls its actions a "special military operation".

The crisis has led to soaring energy prices and concerns about inflation and a possible hit to global economic recovery.

The euro regained some ground on the day after 5 sessions of declines versus the dollar. It was up more than a cent from a trough of US$1.08060 on Monday - its lowest since March 2020 when the Covid-19 pandemic gripped Europe. The single currency was last up 0.5 per cent at US$1.09070.

The dollar index declined 0.2 per cent to 98.983.

The single currency was briefly trading at parity with the Swiss franc on Monday for the first time in 7 years, but again gained some ground, last up 0.6 per cent.

Traders are expecting choppy markets, with euro/dollar volatility gauges at their highest since the market chaos of March 2020. Overall forex volatility gauges were also up to the highest level since April 2020.

Oil prices rose on Tuesday, with Brent surging past US$127 a barrel, as the possibility of formal US sanctions against Russian oil exports spurred concerns over supply.

This helped lift the oil sensitive Norwegian krone by 1 per cent versus the dollar on the day. Analysts expect the supply shock to persist and hold back growth.

The European Central Bank meets on Thursday with the spectre of stagflation prompting economists to suggest policymakers might delay rate hikes until late in the year.

Sterling was last broadly flat at US$1.31135 after falling to a new 16-month low of US$1.30830 earlier in the trading session. The yen fell 0.4 per cent to 115.725 per dollar. The Aussie was last down 0.4 per cent at US$0.72870, while the kiwi was up 0.2 per cent at US$0.68350. REUTERS