Cautious signals of a possible easing in the war between Russia and Ukraine strengthened the European common currency on Tuesday. The euro rate climbed 1.2 percent above the $1.11 mark. According to the Moscow Defense Ministry, Russia wants to significantly reduce its “military activities” in Ukraine near Kyiv and Chernihiv. The Russian ruble and Russian government bonds were in demand. This pushed the 10-year yield down to 12.97 percent. The appreciation of the Russian currency pushed the euro down 7.2 percent to 89.13 rubles. The ruble’s rally is being driven by two other factors, said Iskander Lutsko, chief investment strategist at brokerage house ITI. On the one hand, this is the planned conversion of energy exports to ruble payments and on the other hand the regulation for export companies to exchange 80 percent of their foreign currency holdings in rubles.
Increased investor confidence made “safe havens” less attractive to them. Gold fell 0.5 percent to $1,912 an ounce (31.1 grams). The sales of Bunds temporarily drove the yield on ten-year paper to a four-year high of 0.741 percent. The expected interest rate hikes by the US Federal Reserve and the feared burdens on the global economy from the new lockdowns in China also played a role on the bond market. Faster US monetary tightening amid a slowing economy is fueling fears that a recession is nearer rather than later, said Nat-West investment strategist John Briggs.
On the commodity market, oil prices continued to fall. After prices had already fallen by around ten percent the day before, the price of a barrel of European Brent crude oil fell by 2.8 percent.