Calm in the Crimea Steadies Forex Markets

As the very real threat of a sustained Russian invasion of Ukraine subsides, the Forex markets are breathing a sigh of relief. There are three aspects of Forex to consider as calm in the Crimea steadies Forex markets. First of all the rush to safe haven currencies such as the Yen and Swiss franc may taper off. Second, The Euro will likely recover lost ground as tension between the EU and the Russian Federation falls off. And, third the Russian ruble has taken a hit but may well recover once calm in the Crimea steadies Forex markets. A forth consideration is that continued Russian interference in Ukraine is likely to wreak havoc on all currencies involved.

Threat of War in Ukraine Drives Money to Safe Havens

Ukraine just went through a political crisis which resulted in its president fleeing the country and current leaders calling for new elections in May. Russia on Ukraine’s eastern border sees this as a political and even existential threat. As such Russia sent troops into the southern part of Ukraine, the Crimea with the pretext of protecting native Russian speakers from fascists (think Hitler, Germany and World War II) encouraged by the West (think President Obama, the USA, NATO and German Chancellor Merkel). Although it never was likely that a full scale war would break out in Ukraine, Forex markets were spooked and, as reported in Reuters, Forex traders fled the Ruble, USD and Euro to safe haven currencies such as the Yen and Swiss franc. As things settle down the Euro rises against the Yen and the dollar has recovered a bit.

The euro rose against the yen on Tuesday following reports that Russian President Vladimir Putin has ordered troops who took part in military exercises in central and western Russia to return to base.

The Euro Recovers on Reduced Threat of War

We wrote previously in our article, Forex Response to Violence in the Ukraine, about the huge amount of natural gas that feeds into industrial Europe from Russia via Ukraine. The flight from the Euro to the Yen and Swiss franc were not simply a matter of geopolitical jitters. If Russia continues in a military approach to relations with Ukraine Europe and North America will likely answer with sanctions. This could hurt Russia and the Ruble but also the USD and the Euro. According to, the Euro recovers as Russia backs off a bit.

Market sentiment was boosted after Russian President Vladimir Putin said a military deployment in Ukraine is not needed now…

How about Russia and the Ruble?

Mr. Putin and Russia want to exert a degree of influence or perhaps direct control over Ukraine. However, Russia has a lot that it could lose if things go badly. Russia is the largest producer of natural gas and oil after the USA. It supplies a third of Europe’s energy needs. And Europe supplies Russia with lots of money in return for oil and natural gas. If worse comes to worse in Russia and especially in the Crimea, the Ruble and the Russian economy will suffer according to Radio Free Europe.

The Russian ruble has plummeted to a record low against the U.S. dollar as the Ukrainian crisis revives Cold War-style tensions. Here are four things to know about the ruble’s fall, and where things might go from here. How much has the Russian ruble fallen in recent days? Russia’s ruble fell to a record low of below 36.4 to the dollar and below 50 to the euro for the first time on March 3.

Forex traders may wish to remember just how much Russia and the Ruble stand to lose if the Russian Federation continues to muck around in the Ukraine. If the situation does not right itself we may see an unbridled rush to safe haven currencies, especially from the Euro and Ruble. As calm in the Crimea steadies Forex markets it may only be a prelude to the storm.