Volatility engulfs markets as Russia invades Ukraine
Friday 25 February, 2022
Daily Currency UpdateVolatility engulfed financial markets through trade on Thursday following Russia’s invasion of Ukraine. Hopes of a diplomatic resolution to escalating tensions vanished after President Putin ordered a “Special Military Operation” to liberate the disputed Eastern region of Donbas. After just a few hours it was clear that Putin’s plan extends much further than simply re-taking disputed territories in Ukraine’s East. Targeted missile strikes hit a number of strategic targets and cities across Ukraine, including Kyiv where Russian troops are reportedly attempting to take control of airports surrounding the city as a base to launch a full-scale offensive on the capital and force Ukraine back into Russia’s sphere of influence. The NZD tumbled off its post MPS and RBNZ high, giving up 0.6775 and 0.67 to mark intraday lows at 0.6625. Having found support, the NZD managed to erase some of the day’s losses, climbing steadily into this morning’s open where it currently buys 0.6702 US cents. Having absorbed the initial risk-off play, commodity currencies found some support as key commodity prices rallied, led by oil and gas on fears war will only exacerbate recent supply-side shortages. Markets are likely to continue to ignore domestic drivers as all attentions remain with developments in Eastern Europe.
Key MoversHaven currencies carried the day, buoyed as investors took flight to quality following reports Russia had invaded Ukraine. The USD DXY rallied over 1%, closing in on 18-month highs nearing 98 as the JPY and CHF also found support. The euro collapsed giving up 1.12 and testing a break below 1.11, its lowest level in the past 24 months as investors feared that a full-scale war in Europe will exacerbate supply-side shortages, heighten inflation pressures and cripple the broader European recovery. Having touched 1.1098, the euro found some support moving back toward 1.12 while the GBP marked fresh lows below 1.3275 before recovering and moving back toward 1.34. Geo-political tensions will continue to dominate direction through the next 24 hours as global markets attempt to estimate just how far-reaching this offensive and war will be.
- NZD/USD: 0.6580 - 0.6780 ▼
- NZD/EUR: 0.5920 - 0.6050 ▲
- GBP/NZD: 1.9880 - 2.0150 ▼
- NZD/AUD: 0.9320 - 0.9420 ▼
- NZD/CAD: 0.8530 - 0.8630 ▼