Euro struggles to recover after Ukraine invasion

Euro struggles to recover after Ukraine invasion

The euro was struggling to recover from its plunge the previous day in early Asia trading on Friday after Russia's invasion of Ukraine hit the common European currency and sent investors scrambling for the safety of the dollar, yen and Swiss franc.

Russia's rouble fell overnight to a record low of 89.986 per dollar, before recovering a bit.

The euro was last at $1.1196, its lowest level since May 2020, plunging from the $1.13045 at which it had finished on Wednesday.

The pound and the risk-friendly Australian dollar were hammered while the U.S. dollar lost ground on the yen and Swiss franc.

The dollar index went as high as 97.740, its highest since June 2020. It was last at 96.990.

Hundreds of thousands of people fled their homes as Ukrainian forces fought on multiple fronts after Russia unleashed the biggest attack on a European state since World War Two.

The United States responded with a wave of sanctions preventing Russia's ability to do business in major currencies and sanctions against banks and state-owned enterprises.

Riad Chowdhury APACChowdhury APAC head of MarketAxess said that the first order impact is natural in Russia and Ukraine, but there is an impact on Asia Pacific bond and foreign exchange markets as well.

On Friday morning, the dollar was worth 115.47 yen in Asia after the dollar fell 0.48% on the Japanese currency after it fell to a flight-to-quality type of move, according to Chowdhury. After losing 0.85% the previous day, the dollar was at 0.9241 against the Swiss franc.

The pound was at $1.33840 and the Australian dollar was at $0.7153 as both tried to recover from their Thursday pummelling.

Currency traders tried to assess the war's impact on monetary policy around the world, as well as the direct impact of the war in Ukraine.

Several policymakers at the European Central Bank, including those that are sometimes seen as hawkish, said the situation in Ukraine could cause the European Central Bank to slow its exit from stimulus measures.

The war would probably slow but not stop approaching interest rate hikes, according to investors and some U.S. officials.