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Euro weakens, rouble slumps as sanctions piled on Russia

Currencies Feb 28, 2022 04:07PM ET
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2/2 © Reuters. FILE PHOTO: Euro currency bills are pictured at the Croatian National Bank in Zagreb, Croatia, May 21, 2019. REUTERS/Antonio Bronic 2/2
 
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By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The Russian rouble plunged and the euro nursed losses against the U.S. dollar on Monday as the West ramped up sanctions against Russia over its Ukraine invasion, prompting investors to shun riskier currencies.

Western allies have ramped up efforts to punish Russia with new sanctions including cutting off some of its banks from the SWIFT financial network and limiting Moscow's ability to deploy its $630 billion foreign reserves and shuttering their airspace to Russian aircraft. Companies also reported divestment plans.

After plunging 30% to a record low of 120 per dollar, the rouble recovered some ground, to trade down about 24% on the day at 111 per dollar, as an emergency rate hike and other urgent measures adopted by the Russian central bank helped it trim losses.

Still, outside of the rouble the FX market reaction has been relatively stable, market participants said.

"There is clearly weakness in east European currencies even outside of the rouble... but at the same time they are not really weakening to new record lows or anything like that," said Brad Bechtel, global head of FX at Jefferies, in New York.

"It's a very subdued reaction," he said.

Officials from Russia and Ukraine ended peace talks on Monday and will return to their respective capitals for further consultations before a second round of negotiations, RIA news agency quoted Ukrainian presidential adviser Mykhailo Podolyak as saying.

News of the talks helped soothe some nerves and the euro pared losses to trade down 0.49% on the day at $1.1212, after earlier falling more than 1% to a four-day low of $1.1121.

"The initial knee-jerk reaction is fading from the real extreme flight to safety that we saw at the open yesterday," said Karl Schamotta, chief market strategist at Corpay.

Still, traders remained very skeptical of holding euro positions, Schamotta said.

One-month implied volatility on the euro, a measure of how much traders expect the currency to move against the dollar over the near term, hit a 16-month high on Monday.

General aversion to risk kept the Japanese yen and the Swiss franc well supported. With the greenback down 0.53% against the yen and 0.95% lower against the franc.

While a jump in the price of oil, one of Canada's main exports, helped support the Canadian currency, investors' hesitancy to take on risk kept a lid on the loonie. The Canadian dollar was up about 0.1% at 78.75 U.S. cents.

Besides geopolitical tensions, investors also remain focused on key economic data releases expected later this week, including U.S. nonfarm payrolls due Friday, that could help shape the U.S. Federal Reserve's thinking as it gears up to raise interest rates.

Markets are now pricing in a 93% chance the U.S. Federal Reserve will hike interest rates by 25 basis points at its March meeting, according to CME's Fedwatch tool.

Euro weakens, rouble slumps as sanctions piled on Russia
 

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Comments (6)
Tony Barnes
Tony Barnes Feb 28, 2022 5:39PM ET
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Putin dreams of rejuvenating the glory of the old Soviet Union is over. The longer he drags on the more pain his people will suffer. Could be another revolution from within.
Mag Kurbanov
Mag Kurbanov Feb 28, 2022 5:39PM ET
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we Russians were good for you only when we had a revolution in 1917 and when corrupt morons destroyed the Soviet Union. you are afraid of strength and your whole worldview is to make others weak, although only you are weak. the biggest and strongest sanctions have been imposed against us, and our economy is growing and production is opening))) we are destroying the Nazis and Nazis whom you feed with weapons in Ukraine and show the whole world as if we are destroying someone)) you are weak, we are strong. yes Putin is a thief, but who are your leaders. homosexuals and lesbians.
Anthony Morrow
Note7Creole Feb 28, 2022 6:05AM ET
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end times. was written thousands of yrs ago
Samer Diab
Samer Diab Feb 28, 2022 6:05AM ET
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lol
ievgen iermakov
ievgen iermakov Feb 28, 2022 4:43AM ET
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thank to putin for all this chaos
Random Subscriber
Random Subscriber Feb 28, 2022 4:43AM ET
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Ur so right bro, People just hear "Putin invades" but very small amount of people know the truth and why is this happening. When "Azov" has slaughtered more than 20k russian people in Ukraine and hang the guts of chilldren, no one talks about. Azov groups was sponsored by USA
Evans Mwila
Evans Mwila Feb 28, 2022 4:43AM ET
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America is the biggest problem always force the all world to believe in what they say and no one want hear what Russia want
mina khatri
mina khatri Feb 28, 2022 2:31AM ET
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control food oils prices
Marcus Bennett
Marcus Bennett Feb 27, 2022 8:07PM ET
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everything is scam these days. dont trust everything you see
Show previous replies (4)
True Scotsman
True Scotsman Feb 27, 2022 8:07PM ET
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Pay to play was coined for Hillary Clinton while she was Secretary of State. She wouldn't see anyone unless they donated to the Clinton charity. She's corrupt just like Biden was with his China deals with his crack head son Hunter Biden.
mina khatri
mina khatri Feb 27, 2022 8:07PM ET
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till stuck in the left right paradigm
Daniel Tacker
Daniel Tacker Feb 27, 2022 8:07PM ET
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If everything is a scam, that means "everything" said and read here as well. Just saying.
Daniel Tacker
Daniel Tacker Feb 27, 2022 8:07PM ET
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If everything is a scam, that means "everything" said and read here as well. Just saying.
Daniel Tacker
Daniel Tacker Feb 27, 2022 8:07PM ET
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If everything is a scam, that means "everything" said and read here as well. Just saying.
Bhagwan Dass
Bhagwan Dass Feb 27, 2022 8:06PM ET
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control food grains and food oil prices
 
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