EURO, US DOLLAR, YEN, RUSSIA, UKRAINE, SANCTIONS, S&P – TALKING POINTS:
- Euro sinks as Western powers dial up sanctions against Russia
- S&P cuts Russia credit rating to “junk”, Moody’s set to follow
- Aussie Dollar down, Yen and Franc up in risk-off trading open
The Euro sank at the weekly trading open, shedding over 1 percent against the anti-risk US Dollar and Japanese Yen, after Western powers sharply stiffened sanctions against Russia to punish it for the invasion of Ukraine. A partial ban on Russian entities’ use of the SWIFT bank correspondence system was accompanied by the far more dramatic freezing of the assets of the Central Bank of Russia.
These actions dramatically disrupt Russia’s access to the global financial system, disabling the CBR from defending the freefalling Ruble as well as cutting off the government from cross-border purchases and financing. Russia’s credit rating was promptly cut to “junk” by S&P Global Ratings, citing the “strong” sanctions. Moody’s Investor Service – another top ratings agency – put Russia on review for a downgrade.
Risk appetite understandably collapsed as markets grappled with uncertainty about what is to come next. The Norwegian Krone and Swedish Krona suffered outsized losses given their home countries’ proximity to the crisis as well as their position in the regional economy. The similarly sentiment-sensitive Australian and New Zealand Dollars also fell. A quiet Monday on the APAC data docket offers little to disrupt the risk-off drive ahead.
USD, CHF, JPY vs. AUD, EUR – chart created with TradingView
FX TRADING RESOURCES
— Written by Ilya Spivak, Head of Greater Asia at DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
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