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Euro' gains fizzle as Russia-Ukraine conflict fears intensify

Economy Feb 21, 2022 09:56AM ET
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© Reuters. FILE PHOTO: A picture illustration of U.S. dollar, Swiss Franc, British pound and Euro bank notes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel
 
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By Julien Ponthus

LONDON (Reuters) - The euro's gains fizzled and the dollar received a safe-haven boost on Monday after the Kremlin said there were no concrete plans for a summit over Ukraine between the Russian and U.S. presidents.

Weekend reports that Vladimir Putin and Joe Biden had agreed in principle to discuss finding a possible path out of Europe's biggest military crisis in decades had prompted investors to cautiously buy stocks and the euro and pull capital away from safe-haven shelters such as the yen and government debt.

But the latest news, along with reports of border skirmishes, prompted investors to take shelter.

"Tensions are running high," said Kenneth Broux, an FX strategist at Societe Generale (OTC:SCGLY).

Against the safe-haven Swiss franc, the euro currency sank half a percent to a three-week low at 1.0384 francs per euro.

Versus the greenback the euro, which was up 0.6% at one stage during early London trading, slowly abandoned those gains and was up a meagre 0.1% at $1.1336.

Russia's FSB security service said a shell fired from Ukrainian territory had destroyed a border guard post, while Ukrainian authorities warned that hackers were preparing to launch major attacks on government agencies, banks and the defence sector on Tuesday.

"The optimism has dissipated," said Jeremy Stretch, head of G10 FX strategy at CIBC, pointing to fresh news headlines suggesting that Britain believes Russia may still be planning an invasion.

"Caution is the order of the day," he said.

During the same time, the dollar index recovered most of its losses and was down only 0.13% against major rival currencies.

Echoing the mood swing over the prospects of a de-escalation, European stock markets turned sharply negative after opening in positive territory, with a gauge of European stock market volatility at its highest level since November 2020.

By contrast, safe-have currencies that have benefited from the tensions spurred by Russia's military build-up on Ukraine's borders were back in favour. The Swiss franc added 0.54% at $0.9164 versus a broadly sturdy U.S. dollar.

Bitcoin, which was on a recovery path from a mild bruising over the weekend, struggled to stay in positive territory, holding around $38,500 levels.

While the outcome of negotiations to find a peaceful way out of the Ukrainian crisis remains uncertain, more volatility is expected ahead. A gauge of currency market volatility held near its highest levels since February 2021.

Currency markets participants are also focused on central bank policy, seeking clues on the speed and size of interest rate hikes in major markets.

Investors will be closely watching remarks from U.S. Federal Reserve policymakers this week for any hint that an expected rate hike at the Fed's March meeting could veer more towards to 50 basis points instead of the current consensus for a 25 basis point increase.

Euro' gains fizzle as Russia-Ukraine conflict fears intensify
 

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Comments (7)
Kaveh Sun
Kaveh Sun Feb 21, 2022 10:20AM ET
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Just in, usa said Putin gave command to commanders to invade but they dont know when. What is a # of ‘intel’ from Biden admin.
Keith Wilson
Keith Wilson Feb 21, 2022 10:20AM ET
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I heard the orders to invade were given two days ago and that was on the news.
Jeff Batts
Jeff Batts Feb 21, 2022 10:20AM ET
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Keith Wilson lol na kevah sun breakjng news😭😭😭😭
jason xx
jason xx Feb 21, 2022 10:15AM ET
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This war has been cooking since the Potsdam convention let's crush them and destroy dictatorship and Autocracy once and for all. China and Russia obviously think we are weak for electing chump trump and are trying to take advantage.
Marec Huber
Marec Huber Feb 21, 2022 10:15AM ET
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I think there's more going on here than reaches the news,as usual.One being Putins need for higher energy prices and Biden supporting it ?
bret again
bret again Feb 21, 2022 9:51AM ET
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Roger Roger Roger - i hope that the real americans that read this blog aren’t buying into your anti american *** calling their president and country a failure is pretty low.
Kaveh Sun
Kaveh Sun Feb 21, 2022 9:51AM ET
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Biden is a dissaster. He fails after fails. Inflation is high. Rent is thru the roof.
Kaveh Sun
Kaveh Sun Feb 21, 2022 9:51AM ET
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Just like trump supporters. Dems supporters cant smell # from their pres, party
Roger Miller
Roger Miller Feb 21, 2022 9:41AM ET
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From Captain Covid to GI Joe Biden…how bad will he fail at this? Afghanistan was a smaller operation where he had the upper hand and that went horribly.
Mart Bab
Rubberduck1973 Feb 21, 2022 9:15AM ET
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Fed up with Putin nonsense. Point all nukes to Russia and see if they want to end humanity as we know it
Mario tragik
Mario tragik Feb 21, 2022 8:31AM ET
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And markets care why? give me a break
Samer Diab
Samer Diab Feb 21, 2022 8:31AM ET
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just excuses to continue the correction to -15 % on the spy
 
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