The yen and the dollar spiked up while commodity and emerging-market currencies sagged down with U.S. Secretary of State John Kerry preparing to visit Kiev as Russia seized control of Ukraine’s Crimea region, intensifying one of the most serious standoffs since the Cold War ended.
The U.S. dollar will outperform amid increasing volatility, while there’ll be an automatic selloff in the ruble as commodity currencies and Asian equities come under pressure, said Sebastien Galy at Societe Generale SA in New York. Haven assets such as Treasuries will spike up as investors evaluates the effect on commodities, said Ian Lyngen at CRT Capital Group LLC.
At the end of a month in which global equities, commodities and bonds rallied higher together for the first time since July, the crisis in Ukraine diminish as President Vladimir Putin won parliamentary backing to send troops into Russia’s southern neighbor. Crimea, where Russian speakers comprise the majority, has become the main point of Ukraine’s crisis after an uprising that prompted last month’s overthrow of President Viktor Yanukovych. Ukraine has put its forces on combat readiness and U.S. President Barack Obama warned Russia not to intervene.
“It’s going to be a classic flight to quality move,” Lyngen said by phone from Stamford, Connecticut. “The market is more focused on the extent to which Russia is willing to press their case and how escalated the conflict becomes. They just want to make sure that if there is some big move that has bigger implications that they’re not caught on the wrong side of it.”
Aussie, Euro
The yen spiked up 0.3 percent to 101.52 per dollar as of 8 a.m. in Tokyo, and touched 101.30, the best performing mark since February 6. The euro sagged down 0.2 percent to $1.3775, and relinquished 0.5 percent versus Japan’s currency. Australia’s dollar backslide as much as 0.4 percent to a one-month low of 88.92 U.S. cents while the New Zealand dollar slumped 0.4 percent against the greenback after two days of increases.
“Aussie dollar, kiwi, Canadian dollar are not going to be very happy places,” Galy, a senior currency strategist for SocGen, said in a phone interview.
Poland’s zloty retreated 0.8 percent to 3.0378 a dollar in early trading and the Czech koruna relinquished 0.2 percent, sliding down for the first time in three days. The Hungarian forint missed 0.6 percent. A Bloomberg gauge of 20 developing-nation currencies rallied 0.2 percent on February 28 after weaker-than-projected U.S. growth data increased speculation that the Federal Reserve will continue to support the economy.
Ukraine ‘Disaster’
Ethnic strife blow up in Ukraine’s Crimea region after an uprising led to last week’s overthrow of Yanukovych, who fled to Russia.
Lawmakers in Moscow gave Putin the power to send forces to protect ethnic Russians in Crimea after unidentified troops seized facilities in the Black Sea region. Ukraine is on the “brink of disaster,” Prime Minister Arseniy Yatsenyuk declared yesterday, while Secretary of State Kerry said they are weighing sanctions versus Russia for their actions.
New Zealand’s NZX 50 Index, the first major stock market to open in the Asia Pacific, gave up 0.3 percent today. Gold leaped 0.7 percent to $1,335.49 an ounce, after increasing 6.6 percent in the spot market in February, the sharpest monthly increase since July.
Bond Markets
Yields on Australian 10-year government bonds sagged down a sixth day, surrendering three basis points to 3.99 percent. The Markit iTraxx Australia index of credit default swaps spiked up by 2 basis points to 103.5 basis points as of 8:38 a.m. in Sydney, according to National Australia Bank Ltd. financial values. The gauge was last greater on February 7, according to CMA prices.
In the Middle East yesterday, Dubai’s DFM General Index of stocks relinquished 0.9 percent, the most since February 23, while Abu Dhabi’s stock measure slumped 0.3 percent. Japanese index futures boosted 0.8 percent in Osaka at the end of last week, after the Standard & Poor’s 500 Index ended 0.3 percent greater February 28 at a record high.
Putin told German Chancellor Angela Merkel that Russia’s measures are “appropriate for the extraordinary situation,” during a phone call, according to a statement on the Kremlin’s website. Russian citizens and Russian speakers in Ukraine remain under threat from ultra-nationalists, Putin said. Prime Minister Dmitry Medvedev said on his Facebook page that ousted Yanukovych remained Ukraine’s legitimate leader, though his authority has been almost destroyed.
The tension in Ukraine comes versus a backdrop of improved global progress and U.S. corporate earnings that have helped trigger speculation over whether the Federal Reserve will speed the pace at which it tapers its bond-purchasing program. At the same time, concerns are rising about a slowdown in China and escalating political turmoil in countries from Thailand to Turkey to Venezuela.
