European currencies hammered amid Ukraine crisis

London

THE Russian rouble tumbled to a record low and European currencies including the euro bore the brunt of selling on Thursday (Feb 24) after Russia launched an invasion of Ukraine, sparking dramatic moves across foreign exchange markets. Investors dashed for safe-haven currencies including the US dollar, which jumped 0.9 per cent, as well as the Swiss franc and Japanese yen.

Aside from the rouble, it was the currencies of European countries such the Swedish krona, Hungarian forint and Polish zloty that were hammered the most - all losing more than 1 per cent as traders braced for the fallout from a war in Europe's east and more Western sanctions on Russian assets.

Volatility across FX markets soared, with 1 commonly followed measure hitting its highest since December 2020 . MUFG analyst Lee Hardman said risk-off sentiment would "dominate in the near term favouring further US dollar, yen and Swiss franc strength".

"In contrast, risks remain heavily tilted to the downside for the rouble and other European currencies which are more sensitive to negative spillovers from military action in Ukraine," he said.

The rouble weakened to as low as 89.98 per dollar before recovering some of those losses. The US currency was last up nearly 4 per cent against the Russian currency.

The euro fell as much as 1.2 per cent to US$1.1164, the lowest level since Jan 31. The Swiss franc, a currency investors buy when they are nervous, soared to its highest since 2015 versus the euro at 1.0292 before falling back. The euro was last down 0.6 per cent at 1.0314 francs.

The US dollar index hit 97.04, a 3-week high. John Goldie, an FX dealer at Argentex, said he had been surprised had the limited reaction in currency markets in recent days but "we are now seeing a concerted move into the dollar".

Moves in the Japanese yen were not as dramatic. The dollar was last down 0.3 per cent at 114.71 yen.

Currencies closely linked to global investment sentiment also tumbled. The Swedish krona dropped sharply to its weakest since May 2020 versus the dollar and the euro. The dollar was last up 1.8 per cent at 9.5715 kronor. REUTERS