The Euro Falls as Investors Remain Wary About Ukraine

The euro sank on Thursday as investors worried about the situation in Ukraine and the lack of progress in peace negotiations. At the same time, the Norwegian crown plummeted after the central bank opted to purchase foreign currency. Russian forces are preparing further strikes, according to Ukrainian President Volodymyr Zelensky; peace negotiations set to start on Friday are unlikely to provide a rapid conclusion. After reaching its highest level since March 1 at $1.1184, the euro fell 0.3 percent to $1.1118. “The single currency is constantly around $1.11, with investors remaining wary of further events in Ukraine,” Unicredit (MI: CRDI) FX analyst Roberto Malich said.

Impact of War on Russian Currency

“This is why the rouble’s value versus the dollar is still close to pre-war levels. The dollar is failing to appreciate,” he noted. The dollar index, which compares the US currency to six other currencies, increased 0.2 percent to 98.074.

At 78.55, the rouble was down 3% against the dollar. Following strong inflation figures, investors had their eyes on the next steps by the European Central Bank. On Thursday, ECB chief economist Philip Lane said eurozone inflation was increasingly likely to stabilize at around 2%. Still, the bank should be ready to shift direction if the outlook worsens due to Russia’s war in Ukraine.

Money markets are presently pricing in an 85 percent possibility of ECB rate rises of 20 basis points (bps) by July 2022 and 60 bps by the end of the year. The Norwegian crown fell as oil prices fell; the central bank said in April that it would purchase foreign currency for its sovereign wealth fund.

Norges Bank intends to convert 2 billion crowns ($231.9 million) every day into foreign currency, which will be invested overseas by the wealth fund, currently the world’s largest with $1.3 trillion in assets. The Norwegian currency slid 1.6 percent against the euro, reaching a low of 9.7111 for the first time since March 18, and 1.9 percent against the dollar, at 8.7255.

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