Currency market movesCurrency markets priced in a quick Russia-Ukraine diplomatic solution, driven by hopes early on Monday of a likely summit between US President Joe Biden and Vladimir Putin to discuss the border crisis, which turned out to be too soon.But safe-haven currencies have since gained after Russian President Vladimir Putin ordered troops to Ukraine after recognising breakaway regions, accelerating a crisis the West fears could unleash a major war. That underscores the market reaction was too soon to price-in a quick diplomatic solution, with trading moves expected to be wild and volatile on Tuesday and in the near term. Investors brace for a rough week ahead after the rout on Monday and rattled global markets, wiping out several billions of dollars’ worth of Russian and Ukraine assets, with the latest escalation likely to hurt further. “Markets turned more optimistic on Ukraine’s situation (on Monday) after Biden and Putin agreed to meet. Still, the situation in the Donbas region remains volatile, and we suspect markets may be overpricing a ‘smooth’ diplomatic solution too early. Downside risks for risk assets remain sizeable, and we expect some support to the US dollar and safe havens this week,” wrote Mr Chris Turner, Global Head of Markets at ING. “There is indeed a risk that the situation will morph into a longer diplomatic game that could prevent markets from fully pricing out geopolitical risk for a while,” he added. Global equities took a hit, gold rose to near a nine-month high, and crude oil prices shot up on fears the escalation could be catastrophic. “Geopolitical tensions between Russia and Ukraine mount after Russian President Putin ordered troops into breakaway regions of eastern Ukraine. Western officials fear that Russia could invade Ukraine at any moment, using skirmishes in eastern Ukraine as a possibility of an attack,” said Mr Amit Pabari, Managing Director at CR Forex Advisors. “Global markets reacted aggressively as we saw Asian indices falling close to 2% in the early trade while the safe-haven assets such as gold and yen rallied. The escalation has led oil prices to jump and trade near seven-year highs,” he added.
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