Calm in the Crimea Steadies Forex Markets
As the very real threat of a sustained Russian invasion of Ukraine subsides, the Forex markets are breathing a sigh of relief. There are three aspects of Forex to consider as calm in the Crimea steadies Forex markets. First of all the rush to safe haven currencies such as the Yen and Swiss franc may taper off. Second, The Euro will likely recover lost ground as tension between the EU and the Russian Federation falls off. And, third the Russian ruble has taken a hit but may well recover once calm in the Crimea steadies Forex markets. A forth consideration is that continued Russian interference in Ukraine is likely to wreak havoc on all currencies involved.
Threat of War in Ukraine Drives Money to Safe Havens
Ukraine just went through a political crisis which resulted in its president fleeing the country and current leaders calling for new elections in May. Russia on Ukraine’s eastern border sees this as a political and even existential threat. As such Russia sent troops into the southern part of Ukraine, the Crimea with the pretext of protecting native Russian speakers from fascists (think Hitler, Germany and World War II) encouraged by the West (think President Obama, the USA, NATO and German Chancellor Merkel). Although it never was likely that a full scale war would break out in Ukraine, Forex markets were spooked and, as reported in Reuters, Forex traders fled the Ruble, USD and Euro to safe haven currencies such as the Yen and Swiss franc. As things settle down the Euro rises against the Yen and the dollar has recovered a bit.
The euro rose against the yen on Tuesday following reports that Russian President Vladimir Putin has ordered troops who took part in military exercises in central and western Russia to return to base.
The Euro Recovers on Reduced Threat of War
We wrote previously in our article, Forex Response to Violence in the Ukraine, about the huge amount of natural gas that feeds into industrial Europe from Russia via Ukraine. The flight from the Euro to the Yen and Swiss franc were not simply a matter of geopolitical jitters. If Russia continues in a military approach to relations with Ukraine Europe and North America will likely answer with sanctions. This could hurt Russia and the Ruble but also the USD and the Euro. According to Investing.com, the Euro recovers as Russia backs off a bit.
Market sentiment was boosted after Russian President Vladimir Putin said a military deployment in Ukraine is not needed now…