The US Dollar prices closed at 96.03 on Friday, February 11, 2022. The Ukraine crisis and inflation pull US Dollar prices higher to multi-month highs.
US Dollar Trades at Multi-Month High above 96 Levels
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Concerns over the Russian-Ukraine conflict and high inflation bring a surge in the US Dollar prices. It shot up to 97.44 levels in January 2022. The DXY fell below the psychological mark at 95 in July 2020. But inflation pressure and the threat of war between Ukraine and Russia has pulled the safe-haven Dollar prices higher. The US Dollar currency is trading at a 19-month high with geopolitical tension looming strong.
Prices of the US Dollar and the US Treasuries are surging higher with escalating conflicts in this region. US Treasury yields were moving lower on Friday, with the 10-year yield falling below 2%.
Russia-Ukraine Conflict Causes US Dollar to 96.03 Levels
The conflict between Russia and Ukraine causes political unrest between the two countries.
If an invasion occurs in Ukraine, there will be a severe reaction from the oil and commodity markets. It is the fear of an attack rather than the attack itself which upsets the broader markets.
US President Joe Biden urges American citizens to vacate Ukraine. Russian President Vladimir Putin has also asked Russians to leave Ukraine. It will be a major invasion and bring global unrest.
Russian troops are prepared at the Ukraine borders, ready for an attack.
The military troop instills fear of a war between the two countries. Russia ranks among the top five countries in military power. The troops are camping on Ukraine’s eastern border, prepared to attack the country anytime.
The United States has warned Russia of severe sanctions if it proceeds with its war threat against Ukraine. The European countries and the United Kingdom have also cautioned Russia from continuing its military progress in Ukraine. Europe is the largest importer of gas from Russia. Any war threat will bring in supply disruptions. It will escalate inflation further in the Eurozone.
High Inflation Hits Commodity Prices
Inflation is at a 40-year high in the US. The Labor Department reports that US inflation is at a 4-decade high. The Fed is expected to hike interest rates to curb inflation. It may be an aggressive rate-hike, expect investors. The fear of war and an aggressive rate hike is causing the safe-haven asset US Dollar to surge higher.
Investors prefer to put their investments in the US Dollar and Treasury.
Crude Prices and Inflation
As global leaders prepare to address the conflict between Russia and Ukraine, commodity prices are moving higher. Gold and oil prices are moving higher. Russia is the largest exporter of oil and gas and wheat. If an attack happens, the supply of oil, gas, and wheat to Europe may be affected.
Crude prices are surging towards the seven-year highs at $94.00 per barrel. Rising energy prices may hike inflation rate say, economists. Oil prices are up 3%, moving to seven-year highs. Russia is the world’s leading producer of crude oil, and if war looms, the supply of crude may halt abruptly.
Analysts predict that crude prices may touch $100 if the Ukraine crisis persists. Previously, oil was priced above the $90 per barrel mark in 2014. It shot up to $100 to $105 per barrel in 2014.
Prices of oil declined very low during the pandemic. But in January 2022, oil prices moved higher as demand picked up. Currently, the threat from Russian military troops has pulled crude prices higher to $97.44 per barrel.
Safe-haven asset prices like gold are climbing higher. Gold prices are trading at $1,842 on escalating the Russia-Ukraine conflict. Inflation fears are driving investors towards the yellow metal.
Effects on Global Currencies
In the US, the release of Producer Price Inflation data on Tuesday and the Consumer Sentiment data on Wednesday may hurt market sentiment further, expect analysts. The stock market weakened on the political crisis emerging from Russia.
Global inflation will add pressure on central banks to increase interest rates.
The Japanese Yen strengthened to 115.41 over the weekend. The USD/JPY currency pair surged to a multi-year high on high inflation fear and the conflict prevailing over Ukraine. It is a safe-haven currency pair that investors prefer during troubling times such as a war threat.
The Sterling and the Euro saw a swift drop in value. The ECB President Christine Lagarde warns authorities of raising interest rates. It will hurt the economy, says Lagarde. The EUR/USD is trading lower in 2022, at levels last seen in July 2020.
The AUD/USD and the NZD/USD closed lower for the week. AUD/USD currency pair closed at 0.7135 levels on Friday. NZD/USD closed at 0.6647 for the weekend, as it fell to levels last seen in November 2020.
