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Ukraine Situation Being Eyed With Scepticism By Currency Markets, Some Hope From Possible Summit

Ukraine Situation Being Eyed With Scepticism By Currency Markets, Some Hope From Possible Summit
The currency markets around the world began the week warily anticipating hostilities in eastern Europe, with the safe-haven yen nearing a two-week high and the euro on edge due to the energy security and economic consequences of a war in Ukraine for Europe.
"Russia-Ukraine tensions are starting to dominate risk sentiment and price action. The market is likely to keep chasing headlines without any clarity on the eventual outcome," said analysts at Barclays in a note.
Following the office of French President Emmanuel Macron announcing that the United States President Joe Biden and Russian President Vladimir Putin had decided in principle to get together for a summit for discussing the Ukraine crisis, the euro increased slightly in the Asian market which illustrated the light optimism in the currency market.   
The French president's office however also added that such a summit between the two global leaders would be impossible if Russia invaded Ukraine. 
As a result of the statement, the yen has lost some strength against the dollar, which comes after a week of heightened tensions sparked by Russia's military buildup around Ukraine's borders.
The euro was 0.12% higher at $1.13340, while the yen was 115.05 per dollar, halting its earlier decline from its two-week low of 114.78 hit on Friday.
The geopolitical uncertainty in Eastern Europe has benefited safe-haven currencies like the yen and Swiss franc.
The euro had been hit previously in the session and the yen had been strengthened by the Belarusian defense ministry's declaration on Sunday that Russia will extend military drills in Belarus.
In general, currency movements corresponded to changes in risk perception across asset classes. The price of U.S. stock futures fell in early trade on Monday, before rebounding after the word of the probable conference.
When not thinking about the situation in Eastern Europe, currency markets are still focused on central bank policy, with differences in the speed and magnitude of interest rate hikes in different economies being a prominent influence.
Consequently, investors will be scrutinizing a series of public statements from US Federal Reserve policymakers this week for any indication that a hefty 50 basis point rate hike, rather than the more widely expected 25 basis point boost, could be on the cards at the Fed's March meeting.
The pound was hovering about $1.36000, in the center of its recent range, buoyed by prospects of another rate hike at the Bank of England's March meeting, but dragged down by tensions in Ukraine.
Several BOE policymakers are also expected to make public statements.
Over the weekend, Bitcoin BTC=BTSP recovered a little from a minor bruising. The world's most valuable cryptocurrency was trading at roughly $39,000, up 2 per cent.
It hit a new two-week low of $38,210 early Monday.

Christopher J. Mitchell

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