The dollar went up on Monday, along with the yen and Swiss franc, as investors rushed into safe-haven assets amid fears that Russia is planning to invade Ukraine.
Russia could make a move at any time, and could create a surprise pretext for an attack, according to the United States, which reiterated on Sunday a pledge to defend every inch of NATO territory. Moscow denied any such plans and accused the West of hysteria The dollar index rose 0.4 per cent to 96.328, its highest since February 1.
The implied volatility of the euro-dollar was 7.6 per cent at the end of January, from below 6 per cent at the end of January.
The rouble was 0.1 per cent lower against the dollar, after falling to its lowest since January 28 on Friday as investors ditched Russian assets.
Commerzbank analysts pointed out that the euro zone's cyclical economic performance is particularly vulnerable in the event of an escalation of the conflict in Ukraine because of the European dependency on Russian energy. The euro was down by 0.3 per cent at $1.1318, after hitting its lowest level since Feb. 3 at $1.1305.
The euro fell on Friday when a rush into safe-haven assets overshadowed expectations for monetary policy tightening from the European Central Bank.
Christine Lagarde, the president of the European Central Bank, has also dampened the bullish sentiment by reiterating that any policy action will be gradual.
The U.S. Federal Reserve will release its January meeting minutes on Wednesday, but analysts said central bank action is unlikely to return to the spotlight until there is an escalation over Ukraine.
Since Friday, the Japanese yen has gone up, while the Bank of Japan defended its key bond yield target on Monday, holding the line on its ultra-loose monetary policy.
The yen rose by 0.3 per cent to 115.16 against the dollar and 0.5 per cent against the euro.
The two currencies the U.S. dollar and the yen should remain bid until, and if we get indications that a diplomatic solution is in sight, ING analysts said. markets are adopting a wait and see approach to geopolitics at the beginning of the new week. There are quite significant downside risks for exposed currencies - directly the rouble and indirectly all procyclical currencies and especially the European ones - if tension escalates further, ING said.
The Swiss franc was up 0.4 per cent against the euro to 1.0452, its highest since Feb. 3.
It was down 1 per cent at around $42,116 in cryptocurrencies.