©Reuters. FILE PHOTO. A shopper pays with a euro note at a market in Nice, France. April 3, 2019. REUTERS/Eric Gaillard
Por Iain Withers
LONDON, March 8 (Reuters) – The euro traded near its 22-month low on Tuesday as the war in Ukraine darkens Europe’s economic outlook, while currencies buoyed by rising energy prices halted their rally. rise after a rally of several weeks.
Russia’s invasion of Ukraine has sparked a surge in demand for assets seen as safer across markets, with the dollar — the world’s reserve currency — rising about 3% in nearly two weeks as the crisis intensified. .
The euro recovered ground on the day after five sessions of declines, but remains trading near a low of $1.08060 on Monday, its lowest level since March 2020, when the COVID-19 pandemic gripped Europe.
The Russian offensive in Ukraine continued on Tuesday, but at a slower pace, although the fighting shows no signs of abating. Russia calls its actions a “special military operation.”
The crisis has caused energy prices to rise and concerns about inflation and a possible blow to the global economic recovery.
“The price development appears to reflect concerns about a deeper slowdown or recession in the global economy as a result of the energy price crisis,” currency analysts at MUFG note in a note.
“The weakening of the growth prospects of the euro zone economy is already reflected in the weakness of the euro.”
The was broadly unchanged on the day at $99.146, while the euro was up 0.2% at time of writing at $1.08795.
On Monday, the single currency briefly traded at par with the Swiss franc for the first time in seven years, but regained some ground afterwards, rising 0.6% at the time of writing.
Traders expect choppy markets, with euro/dollar volatility gauges at their highest since the market chaos of March 2020. Global forex market volatility gauges also hit their highest level since April 2020 .
Although Germany’s opposition to a ban on Russian energy imports pushed futures down from a 14-year high reached on Monday, analysts expect the supply crisis to persist and dampen growth.
The ECB meets on Thursday and the specter of stagflation has economists suggesting that the institution’s officials could delay rate hikes until the end of the year.
Sterling was up 0.2% at $1.31270 at press time, after falling to a fresh 16-month low of $1.30830 earlier in the session.
The yen was slightly lower at 115.57 per dollar.
In addition to the rally in commodities, the war and subsequent Western sanctions have hit Russian assets, with the ruble falling to a record low of 160 per dollar in erratic foreign trading on Monday. On Tuesday, the ruble recovered slightly in foreign trade.
Commodities and currencies of exporting countries halted their gains on Tuesday, with the Australian and New Zealand dollars slipping off four-month highs hit on Monday. Traders are beginning to fear that, in the long term, high commodity prices could become a drag on global growth.
The Australian dollar was down a third of a point at $0.72905, while the New Zealand dollar was broadly flat at $0.68290.
(Reporting by Iain Withers; additional reporting by Tom Westbrook in Singapore; editing by Ed Osmond; translation by Darío Fernández)
