Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Euro falls to one-month low as Ukraine tensions simmer

EconomyJan 25, 2022 03:36PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Pound and U.S. dollar bills are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration

By Herbert Lash

NEW YORK (Reuters) -The euro fell to a one-month low on Tuesday as tensions between Russia and the West over Ukraine drew investors to the dollar, a day before the Federal Reserve is expected to reveal details on its plans to tighten monetary policy.

Western leaders stepped up preparations for any Russian military action in Ukraine while Moscow said it was watching with great concern after 8,500 U.S. troops were put on alert to deploy to Europe in the event of an escalation.

Tensions remained high after NATO said on Monday it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets in response to Russia's troop build-up near its border with Ukraine.

The rouble rebounded to strengthen 0.54% to 78.62 per dollar after earlier weakening toward a more than 14-month low.

Ukraine tensions have exposed the euro and Europe, especially regarding energy, but the dollar's strength has more to do with Fed policy tightening, said Alvise Marino, director of FX strategy at Credit Suisse (SIX:CSGN).

"The market was pricing in one hike by the Fed in 2022. Now we're pricing four. That is ultimately the major driver of the dollar strength we've seen the past three months," he said.

"This accelerated a bit on the back of weakness in the broader equity markets and risk appetites that you've seen in particular since last Wednesday," Marino said.

The dollar's strength indicates its role as the ultimate safe-haven currency, said Marshall Gittler, head of Investment Research at BDSwiss Holding Ltd.

Currencies usually gain when rates are expected to go higher and fall when expectations of future rate hikes increase, Gittler said. "It's not just that (the dollar) rose during a risk-off period but also that it rose even as expectations for Fed tightening were pared back."

With other central banks poised to raise rates too, dollar volatility has abated as the Cboe volatility index for the S&P 500 stocks has doubled so far in 2022, Marino said.

The dollar index pared some gains to rise 0.097%, with the euro down 0.23% to $1.1297. The Japanese yen strengthened 0.01% at 113.92 per dollar.

The Fed could firm up plans to raise interest rates and shrink its holdings of U.S. Treasury bonds and mortgage-backed securities, which have swollen its balance sheet to about $9 trillion. The Fed's two-day meeting ends Wednesday.

Analyst views of the meeting are mixed, with Deutsche Bank (DE:DBKGn) flagging a potentially hawkish surprise over the coming months, with as many as six or seven increases this year.

But ING analysts say that if the Fed's balance sheet reduction does the heavy lifting of policy normalization, that could scale back forecasts for the number of rate hikes.

Fed funds futures have fully priced in a quarter-point tightening for the Fed's March meeting, plus three more for 2022.

The Swiss Franc fell 0.29% against the euro at 1.0379, just off the 1.0298 it hit recently for its strongest since 2015.

Bitcoin, which has almost halved in value since touching a record high of $69,000 in November, rebounded about 0.78% to trade at $37,010 as the S&P 500 and Nasdaq pared steep looses.

Ether, the world's second-largest cryptocurrency, rose 0.47% at $2,454.91.

Euro falls to one-month low as Ukraine tensions simmer
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email