Dollar gains as Ukraine tensions rise after U.S. warning

© Reuters. FILE PHOTO: A U.S. one dollar banknote is seen in this illustration taken November 23, 2021. REUTERS/Murad Sezer/Illustration

By Hannah Lang and Herbert Lash

WASHINGTON (Reuters) -The dollar rose along with other safe-haven assets on Friday after the United States said Russia has massed enough troops near Ukraine to launch a major invasion.

A Russian attack could begin any day and would likely start with an air assault, White House national security adviser Jake Sullivan told a media briefing.

The dollar had been trading mostly sideways when the U.S. warning hit markets. The dollar index, a measure of the greenback against six major currencies, rose 0.258%.

U.S. crude futures jumped more than 5% to $94.66 a barrel, the highest since 2014, while gold rose more than 2% to a near two-month high at one point.

The dollar's rise was due to Sullivan's comments, as well as reports that Russian President Vladimir Putin had decided to invade Ukraine, which the White House later disputed, said Bipan Rai, head of FX strategy at CIBC Capital Markets in Toronto.

That move up, along with moves in other safe-haven assets such as U.S. Treasuries and the Japanese yen, indicates the market is growing more and more concerned about the prospect of an invasion, said Rai.

"It’s definitely a safe-haven move," he said.

The Japanese yen strengthened 0.63% versus the greenback at 115.29 per dollar, while the Canadian dollar weakened as the potential for an imminent Russian attack triggered a sell-off in risk-sensitive assets.

Russia's currency, already lower for the day, fell further on the news. The rouble was last down 2.73% versus the greenback at 77.00 per dollar.

Washington urged all U.S. citizens to leave the country within 48 hours. Other countries -- including Britain, Japan, Latvia, Norway and the Netherlands -- told their citizens to leave Ukraine immediately.

The euro, meanwhile, weakened as markets processed the news, and was set for a weekly decline after European Central Bank President Christine Lagarde said in an interview that raising rates now would not bring down record euro zone inflation but only hurt the economy.

The greenback had struggled to pick a direction earlier in the day as investors digested the University of Michigan’s preliminary consumer sentiment index for February.

That report found that U.S. consumer sentiment fell to its lowest level in more than a decade in early February amid expectations that inflation would continue to rise in the near term. Economists polled by Reuters had forecast the index edging up.

The market's lack of clarity as to how interest rate hikes might progress has contributed to frenzied sessions this week as the dollar remains undecided on the future, said Erik Nelson, a currency strategist at Wells Fargo (NYSE:WFC) Securities.

“I tend to think we consolidate in the short term here and am still biased toward euro downside, dollar upside against most currencies,” he said.

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Currency bid prices at 3:57PM (2057 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct Change High Bid Low Bid

Previous

Session

Dollar index 96.0390 95.7950 +0.27% 0.393% +96.1180 +95.6380

Euro/Dollar $1.1343 $1.1427 -0.73% -0.22% +$1.1435 +$1.1330

Dollar/Yen 115.2950 116.0000 -0.59% +0.17% +116.1700 +115.0350

Euro/Yen 130.77 132.56 -1.35% +0.35% +132.6100 +130.3900

Dollar/Swiss 0.9250 0.9253 -0.03% +1.40% +0.9287 +0.9236

Sterling/Dollar $1.3554 $1.3561 -0.05% +0.23% +$1.3609 +$1.3515

Dollar/Canadian 1.2741 1.2724 +0.14% +0.78% +1.2753 +1.2670

Aussie/Dollar $0.7134 $0.7169 -0.48% -1.85% +$0.7185 +$0.7109

Euro/Swiss 1.0491 1.0572 -0.77% +1.18% +1.0575 +1.0482

Euro/Sterling 0.8367 0.8426 -0.70% -0.39% +0.8431 +0.8360

NZ Dollar/Dollar $0.6644 $0.6676 -0.43% -2.89% +$0.6693 +$0.6628

Dollar/Norway 8.8680 8.8150 +0.66% +0.72% +8.8870 +8.7925

Euro/Norway 10.0617 10.0600 +0.02% +0.49% +10.0994 +10.0228

Dollar/Sweden 9.3422 9.2904 -0.26% +3.60% +9.3599 +9.2403

Euro/Sweden 10.5976 10.6249 -0.26% +3.55% +10.6437 +10.5370