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Russia-Ukraine crisis has hit many currencies hard

Currency markets have not escaped losses classes in recent weeks and experts are changing their strategies in light of Russia's invasion of Ukraine. The Deutsche Bank Currency Volatility Index climbed toward 10% on Tuesday morning in Europe, its highest level since April 2020, in the early stages of the pandemic.

The euro gained 0.4% against the dollar on Tuesday as some of the flight to safe-haven assets moderated, but was still down more than 4% against the greenback since the war began, as conflict intensified and focus switched to the looming threat to European energy supplies. The common currency slid more than 1% on Monday to conclude its largest three-day slide since March 2020.

In a note Friday, Goldman Sachs co-heads of global FX, rates and EM strategy, Zach Pandl and Kamakshya Trivedi, said the Wall Street giant's constructive outlook on the euro was now off the table as long as military conflict continues. "Despite the sharp fall in EUR/USD, these models suggest the currency should be trading somewhat lower—around 1.07-1.08—given the moves in other market variables," Pandl and Trivedi said.

Cnbc.com reports that, although they noted that estimates should be approached with caution, the models suggested that the euro is relatively strong against the Polish zloty (PLN), Swedish krona (SEK), U.S. dollar (USD), Hungarian forint (HUF) and British pound (GBP), while somewhat weak against the Swiss franc (CHF).

Ruble and Eastern Europe
The Russian ruble has lost more than 64% to the dollar year-to-date to reach a record low, in large part due to the surprising severity of western sanctions imposed on Russia and its financial system, which aimed to isolate Moscow from the global economy.

Russia turns to renminbi
Russian companies and banks are turning to China's currency, the yuan (also known as the renminbi), as the doors to the US dollar-based global financial system slam shut due to sanctions.

FESCO Transportation Group, a Russian logistics company, told customers last week that it would accept payment in yuan. After Visa and Mastercard suspended their operations in Russia, some Russian banks are considering switching to UnionPay, China's state-owned card payments system.


Source: axios.com


Photo source: Dreamstime.com


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