Euro Under Pressure In Asia As War Triggers Stagflation Concerns

UNSPLASH ILLUSTRATION

JAKARTA - The euro squeezed near a 21-month low in Asian trade on Thursday afternoon, on concerns that Russia's invasion of Ukraine would hurt European growth, while commodity currencies hit multi-week highs as export prices soared.

The euro was last at $1.1097 in Asia, just above its overnight trough of $1.1058, its lowest since May 2020. The euro is down 1.5 percent for the week and heading for a weekly loss. fourth in a row against the US dollar.

The Australian dollar held firm at US$0.7300, not far from a seven-week high on Wednesday, March 2 at US$0.7306, as prices of Australian exports such as coal, gas, and grain surged on signs a sign that sanctions against Russia are seriously disrupting global supplies.

The euro is now down nine sessions in a row to a four-year low of 1.5218 Australian dollars.

"In the current crisis, we view the status of the euro as vulnerable", said senior FX strategist Jane Foley at Rabobank, who views her $1.11 target on the downside.

"At the corporate level, there is a complex network of relationships between EU and Russian companies, particularly in the energy sector", Foley said.

"Energy prices have been pushed higher as has been the case for many agricultural products. The war in Ukraine thus suggests higher inflation and the potential for slower economic growth."

Eurozone inflation hit a record high of 5.8 percent last month, data showed overnight, topping expectations and prompting warnings from policymakers about stagflation.

The Sterling has been dragged lower with the euro since the Russian invasion, although it managed to bounce off Wednesday's March 2 low of 1.3275 dollars to trade at 1.341 dollars in Asia.

Refugees such as the yen and Swiss franc have been supported, although they slumped overnight on a stronger dollar and riskier currencies. The yen last traded at 115.67 per dollar. The US dollar index was perched at 97.502.

Federal Reserve Chair, Jerome Powell, said on Wednesday, March 2 the central bank would begin to "carefully" raise interest rates this month, but was prepared to move more aggressively if needed - the more or less the scenario traders had foreseen.

Russian troops were in the central Ukrainian Black Sea port of Kherson on Thursday, although Ukrainian officials said their troops were continuing to defend the city.

Other cities including Ukraine's second-largest city, Kharkiv, continue to face bombings and bombings.

Brent crude futures jumped to a nine-year high of 118.22 dollars a barrel.

That spike and the Canadian central bank's first interest rate hike since 2018 pushed the loonie to a five-week high of 1.2632 Canadian dollars per dollar. The Canadian dollar held steady near that level in Thursday trade.

A UN resolution rebuking Moscow was supported by 141 of the 193-member assembly. Heavy sanctions have hit Russian assets and the ruble, which touched a record low of 110 per dollar in Moscow on Wednesday, March 2.

The ruble was slightly higher at 98 per dollar in interbank trading outside Russia.

Eastern European currencies, meanwhile, have taken a hit, with the Hungarian forint hitting record lows against the dollar and euro overnight and the Polish zloty slumping to a two-decade trough.

The New Zealand dollar held near a one-week high Wednesday, March 2 at 0.6779 US dollars. Bitcoin inched lower to around $43,500 as the early-week rebound lost ground.