The euro fell against the dollar on Tuesday to its lowest level since June 2020 in a market very worried about the invasion of Ukraine by Russia, the ruble starting to fall again while bitcoin continued to rise.
Around 7:30 p.m. GMT the euro lost 0.86% to 1.1122 dollars for one euro. Earlier the European currency had fallen to its lowest since June 2020.
Russia further stepped up its offensive in Ukraine on Tuesdaytargeting cities, including Kiev and Kharkiv, where the bombings caused a number of civilian victims, pushing the Europeans, urged to act by the Ukrainian president, to further toughen their sanctions against Russia.
Consequence of the conflict for forex traders, “European currencies have been struggling since this weekend“, commented Matthew Ryan, an analyst at Ebury, who notes that “the US dollar appears to be the safe haven of choice“.
Furthermore, with the sanctions that hit Russian banks banned from the Swift system and froze the assets of Russia’s central bank“there is a strong demand for liquidity which benefits the greenback“, underlined Christopher Vecchio of DailyFX.
The dollar comes out stronger
The differential in bond yields on 10-year debt between Europe and the United States also played in favor of the dollar, added the analyst.
“Yields on US Treasuries are not falling as much as for European bonds“, noted the analyst again citing as an example the 10-year rate of Italian debt which rose during the day from 1.87% to 1.39%.
“This Russian episode could cause a banking crisis in Europe given the previous links between the European Union and Russia“, worried Christopher Vecchio.
“The market now completely rules out an interest rate hike from the European Central Bank (ECB)“, said the analyst, while the Fed should give its first tightening in two weeks, which also benefited the dollar.
The Russian currency, meanwhile, recovered a little to 109.75 rubles to the dollar (+5%) but remained at historic lows after falling to 117 rubles to the dollar in session.
Finally, the bitcoin cryptocurrency continued to rise (+5.62% to 43,996.05 dollars).
“The Russians, who see their currency falling, have increased their purchases of bitcoins“, notes Susannah Streeter, analyst at Hargreaves Lansdown, who warns however that “Uncertainty around the Ukraine crisis will continue to fuel crypto-asset volatility“.