The euro plunged after Russian President Vladimir Putin threatened to escalate the war in Ukraine, adding to the trouble facing the single currency from an expected big new Fed rate hike tonight.
Its parity fell as much as 0.9% to $0.9885, which is a two-week low as Putin declared partial mobilization and said he would use all means necessary to defend Russian territory following a move to annex Ukrainian territory he has seized.
These news “show that we may be on the brink of an escalation of war, which raises a whole range of new uncertainties,” said a Rabobank analyst, adding that “this will negatively impact the euro and Eastern European currencies.”
On the contrary, this development supports the dollar as a safe haven for investors, the analyst noted.
Lower yields on Eurozone bonds
Eurozone and US government bond prices rose as investors sought safe havens, although expectations of a 75 basis point increase in US interest rates; for the third time in a row, they limited bond gains. With the new hike, the Fed’s interest rates will be set at their highest levels since 2008.
The yield on 10-year German bonds fell by 6 bps. to 1.87% and the corresponding American ones by 4 bp. to 3.52%.
With information from Bloomberg
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