Dollar rises on Ukraine developments

Ukraine jitters raise risk apprehension

With US markets closed for a holiday overnight, volumes and volatility were muted in currency markets, sparing them the worst of the ravages seen elsewhere. Still, the US dollar did receive a modest haven bid, and the old adage of always buying US dollars in a war is as good today as it was all those decades ago when I started my trading career. Overnight the dollar index rose unwound all its early Monday losses to close at 96.16, where it remains in Asia. 95.70 and 96.50 are the near-term support/resistance levels.

 

Asia FX traders are clearly in wait-and-see mode today with volatility muted and the major currencies most around where they opened yesterday morning.  EUR/USD is steady at 1.1305, USD/JPY at 114.65, GBP/USD at 1.3585, AUD/USD at 0.7195 and NZD/USD at 0.6705 with AUD and NZD giving back all of yesterday morning’s gains. With the Ukraine situation deteriorating from a market perspective, the risks have skewed towards a higher US dollar, and potentially yen, as investors look for havens. The euro is likely to be the most vulnerable major currency, due to its energy supply chain vulnerability to Russia and pure geography.

 

Asian currencies retreated overnight as well, perhaps more on rising oil prices than Ukrainian geopolitical nerves, although they are all an intertwined story. The fallout remains relatively modest for now, especially with USD/CNY remaining anchored near 6.3500. A rise through USD 100 by Brent crude, seemingly inevitable in my opinion, will change that dynamic with most of the region being major energy importers. Malaysia and Indonesia should fare better than most because of that.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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