The euro was squeezed near a 21-month low on Thursday by concerns that Russia's invasion of Ukraine would hurt European growth, while commodity currencies hit multi-week highs as export prices soared.
The euro recovered to $1.1111 in early Asia from an overnight low of $1.1058, its lowest since May 2020. But it's down 1.4% so far for the week and heading for a fourth straight weekly loss against the US dollar.
The Australian dollar touched a seven-week high of $0.7306 on Wednesday and hovered near that level of $0.7295 on Thursday as prices for Australian exports such as coal, gas, and grains surged.
The monetary unit is currently down 9 sessions during a row to a four-year low of A$1.5218 against the Australian dollar. In the current crisis, we view the euro's status as vulnerable, said senior FX strategist Jane Foley at Rabobank, who views a $1.11 target on the downside.
At the corporate level, there is a complex network of relationships between EU and Russian companies, particularly in the energy sector, Foley said.
The Weakening of The Euro Is Also Triggered by High Inflation
Energy prices have been pushed higher as they have for many agricultural products. The war in Ukraine thus suggests a higher for longer inflation and the potential for slower economic growth.
Eurozone inflation hit a record high of 5.8% last month, data showed overnight, topping expectations, and prompting warnings from policymakers about stagflation.
The Sterling has been pulled lower with the euro since the Russian invasion, although managed to bounce off Wednesday's low of 1.3275 to trade at 1.3387 in Asia.
Refugees such as the yen and Swiss franc have been supported, although they slumped overnight on the strength of the dollar and riskier currencies. The yen last listed at a hundred and 15.54 per dollar. The USA dollar index Sabbatum at 97.479.
Federal Reserve Chair theologiser Powell same weekday that the financial institution can begin to be "cautious" regarding raising interest rates this month, however, is prepared to maneuver additional sharply if required - the situation traders had been evaluation in.
The euro weakened and safe-haven currencies including the US dollar were in demand on Thursday amid growing fears of a full-scale Russian invasion of Ukraine.
The greenback, yen, and Swiss franc all climbed back towards multi-week highs for the European single currency, while the greenback hovered near one-week peaks versus majors after US Secretary of State Antony Blinken said he believed Russia would strike Ukraine within hours.
Other Currency Moves Due to Ukraine
Riskier commodity-linked currencies also fell, succumbing to a deteriorating risk sentiment after the start of the week proved resilient on high commodity prices.
Ukraine has declared a state of emergency and Moscow has begun evacuating its embassy in Kyiv, while the West has imposed sanctions on Russia. The euro fell as much as 0.26% to $1.12750, its lowest level since Feb 3.
It fell 0.29% to 129.640 yen, near Tuesday's low of 129.360, its weakest since Feb 3. It slipped 0.22% to 1.03550 francs, closing at Tuesday's trough at 1.03405, which was its lowest since Jan 24.
The USA dollar index - that measures the currency against a basket of six major currencies, together with the monetary unit, yen, and Swiss franc - rose the maximum amount as 0.19% to 96.372 for the primary time since Valentine's Day.
Seeing a knee-jerk reaction to Blinken's comments, with haven currencies in demand and euros and commodity currencies selling, said Joseph Capurso, strategist at Commonwealth Bank of Australia.
Officials from Russia and Ukraine concluded peace talks on Monday and will return to their respective capitals for further consultations before the second round of negotiations, RIA news agency quoted Ukrainian presidential adviser Mykhailo Podolyak as saying.
