The euro retreats after the shock of the war

The euro edged higher on Friday after Thursday’s sharp declines following Russia’s invasion of Ukraine.

The U.S. dollar edged lower against most currencies as markets pulled back from some of the stormy moves of the previous day.

The Russian ruble also recovered ground, trading at around 83.5 to the US dollar, after hitting a record low of 89.986 the day before.

In Taipei, the New Taiwan Dollar rose against the US dollar, gaining NT$0.002 to close at NT$28.021, up 2.94% from NT$28.870 the previous week.

Turnover totaled $1.605 billion during the trading session.

The greenback opened at NT$28.020 and traded between NT$28.006 and NT$28.074.

“Currency markets are slightly calmer this morning as the world tries to come to terms with the war in Europe,” said Chris Turner, global head of markets at ING.

The size and depth of the sanctions against Russian banks and the size of their foreign currency deposits could take some time to kick in, he said.

The United States, the EU and some other countries reacted to Russia’s invasion of Ukraine with a wave of sanctions, hampering Russia’s ability to do business in major currencies, as well as sanctions against banks and public enterprises.

Currency traders were trying to gauge the effect on monetary policy around the world.

European Central Bank (ECB) policymakers said the situation in Ukraine could cause the bank to slow its exit from stimulus.

Investors now expect the ECB to raise its key rate by 35 basis points by the end of December.

Earlier last week, they saw the ECB raise rates by 50 basis points by December.

Meanwhile, investors and some U.S. officials have said the war is likely to slow, but won’t stop nearing interest rate hikes.

James Malcolm, head of UBS FX strategy, said he was surprised at how little the euro had sold off against the European stock market after the attacks, which were currently widely seen as a “European shock”.

“If this gets further and further out of control and becomes a bigger risk event globally and affects central bank prices…any less Fed spillover [US Federal Reserve] prices will affect the dollar/yen certainly more than the euro/Switzerland [franc]”Malcolm said.

The euro fell Thursday to its lowest level in seven years against the safe haven Swiss franc.

The single currency was last up 0.1% at 1.0373.

It was also up 0.1% against the dollar at 1.1204, having touched its lowest since May 2020 at 1.1106 in the previous session.

The dollar index against a basket of currencies including the euro fell 0.1% on Friday to 96.981, after hitting its highest level since June 2020.

Bitcoin joined the recovery, up 1.1% to $38,817.

Additional CNA and Editorial Team Reports

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