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Ukraine crisis puts euro on course for worst week in two years -Breaking

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© Reuters. This illustration was taken on February 14, 2022. It shows a Euro banknote printed on U.S. Dollar notes. REUTERS/Dado Ruvic/Illustration

By Alun John

HONG KONG, (Reuters) – The euro fell against the dollar for the first time in almost two years as fears of a prolonged high in commodity prices and war in Ukraine weighed on European growth expectations.

In early Asia trade the European common currency plummeted to $1.1008 after news that Ukraine’s Zaporizhzhia Nuclear Power Plant – one of Europe’s largest – had been set on fire by Russian troops.

After officials from Ukraine and abroad said that there was no evidence of high radiation levels at the facility, it recovered to about $1.103, though still down by 0.34% and 2.1% for the week. This week has been its worst since March 2020.

The euro also has its lowest levels in four years, and its weakest level since July 2016.

On the ninth day, Russian forces continued to attack and surround Ukrainian cities. This included Mariupol which was under heavy bombardment.

This war is going to be disastrous for Ukraine. Russia’s economy will be hurt in the long-term and short-term. Analysts at ING said that the sanctions will not only affect Russia, but also EU countries.

According to them, the rising prices of energy and natural gas could have a negative impact on the recovery in private and industrial consumption expected after the lifting of COVID-19 restraints. It was also possible that it would slow down the normalization of European Central Bank policies.

According to them, “Any hints at rate rises will be outlawed during the ECB meeting next week.”

The U.S. Federal Reserve, however, is almost certain to raise interest rates during its March 15-16 meeting. This will be the first increase since the pandemic.

Jerome Powell, Fed Chair and reiterated his Wednesday comments about he backing a first quarter percentile point hike in the benchmark interest rate.

Elsewhere the Australian dollar rose, helped by the commodities boom and reached $0.7362 on Friday. That’s a new 4-month high.

Bank of America (NYSE;) analysts noted that Australia’s gains were notable due to a number of factors, including the selloff in global stock markets, the still dovish Reserve Bank of Australia, and wide dollar strength. These are all things which could normally have negative effects on the currency.

The nation’s gains were attributed to the large dividends paid by resource companies, which led to the purchase of Australian dollars and the wider effect of commodity prices on Australia’s terms.

Due to Japan’s net import of energy, high energy prices have also prevented the Japanese currency from taking advantage as much of the safe haven flows.

When news of the fire broke out, the yen briefly rose against the dollar. However, it soon lost its gains and traded at 115.49 to the dollar.

Elsewhere sterling fell to $1.3342 as well as bitcoin which dropped 2.7% to $41,300.

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