FX Markets Nervously Watch Ukraine Headlines, Cheer for Possible Top

An illustration of U.S. dollars, Swiss francs, pounds sterling and euros banknotes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel

HONG KONG, Feb 21 (Reuters) – Currency markets started the week nervously watching tensions in Eastern Europe, with the safe-haven yen not far off a two-week high while the euro was on edge given the energy security and economic implications for Europe. of a war in Ukraine.

“Tensions between Russia and Ukraine are beginning to dominate risk sentiment and price action. The market is likely to continue to dominate the headlines with no clarity on the eventual outcome,” Barclays analysts said in a rating.

To illustrate this, the euro took a small boost at the start of the Asian session after French President Emmanuel Macron’s office said that US President Joe Biden and Russian President Vladimir Putin had agreed in principle to hold a summit on the Ukrainian crisis, although he added such a meeting would be impossible if Russia invaded Ukraine. Read more

In turn, the yen lost minimal ground against the dollar after the announcement, which comes after a week of heightened tensions spurred by Russia’s military buildup on Ukraine’s borders.

The euro was up 0.12% at $1.13340 while the yen was at 115.05 to the dollar, pausing its earlier drift to its two-week low at 114.78 hit on Friday.

Safe havens such as the yen and the Swiss franc have been the main beneficiaries of geopolitical tensions in Eastern Europe.

Earlier in the session, the euro was hurt and the yen boosted by the Belarusian Defense Ministry’s announcement on Sunday that Russia would extend military exercises in Belarus.

In broad terms, movements in currencies are aligned with movements in risk sentiment across asset classes. US stock futures slipped in early trading on Monday, before turning positive after news of a possible top.

When not thinking about the situation in Eastern Europe, the currency markets still focus on central bank policy, discrepancies in the speed and magnitude of interest rate hikes by different markets being a major factor.

As a result, markets will be closely watching a series of public remarks by US Federal Reserve policymakers this week for any hint that a sharp 50 basis point rate hike could take place at the Fed’s March meeting. instead of the more widely expected 25 basis point increase. .

The pound was drifting somewhat at $1.36000 in the middle of its recent range, supported by expectations of another rate hike at the Bank of England’s March meeting, although perhaps weighed down by tensions in Ukraine.

Public remarks are also expected from several BOE policymakers.

Bitcoin BTC=BTSP> recovered a bit from a slight bruise over the weekend. The world’s largest cryptocurrency rose 2% to around $39,000.

Early Monday, it hit a new two-week low at $38,210.

Reporting by Alun John; Editing by Stephen Coates

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