By Alun John

HONG KONG (Reuters – Currency markets opened the week cautiously, eying tensions between eastern Europe and Japan. While the safe-haven yen was close to a 2-week high, the euro was at edge considering the potential economic impact on Europe and energy security of a possible war in Ukraine.

The Russian-Ukraine tensions have begun to dominate price action and risk sentiment. Analysts at Barclays Note: (LON)

This is illustrated by the fact that the euro gained some ground in Asia after the French president Emmanuel Macron stated that U.S. President Joe Biden had agreed to host a summit regarding the Ukraine crisis. However, it said such a meeting would not be possible if Russia invades Ukraine.

The announcement came after weeks of increased tensions caused by Russia’s military buildup at Ukraine’s borders.

1.13340 was 0.12% more than the euro. The yen, however, was at 115.05 dollars. This halts its drift to its previous low of 114.78 on Friday.

Geopolitical tension in eastern Europe has been particularly beneficial to the Swiss franc and yen, which are safe havens.

The euro was weaker earlier in the session and the yen gained after Sunday’s announcement by the Belarusian defense ministry that Russia will extend military drills to Belarus.

The movements in currencies were correlated with changes in risk sentiment across all asset classes. U.S. Share futures dropped in morning trading Monday but turned positive following news about the potential summit. [MKTS/GLOB]

While not considering eastern Europe’s situation, the currency markets continue to focus on central banks policy. There are divergences between the rate and the size of interest rates hikes in different markets.

The markets will closely monitor a number of U.S. Federal Reserve policymakers’ public comments this week in order to detect any sign that a significant 50-basis point rate increase could be coming at the Fed’s March meeting rather than the expected 25 basis points.

In the middle of the recent range, the pound drifted slightly to $1.36000. Supported by the expectation of another rate increase at Bank of England’s March Meeting, but possibly weighed by Ukraine tensions, the pound is now drifting at this level.

Many policy-makers at the BOE are expected to also make public comments.

The weekend brought some relief from mild bruises. At around $39,000, the world’s biggest cryptocurrency went up by 2%.

It touched $38,210 on Monday morning, a new low for the week.