Dollar Soars As Investors Stampede To Safety

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Global equity markets slumped and oil prices exceeded $100 a barrel for the first time since 2014 amid massive risk aversion as Russia launched an invasion of Ukraine early on Thursday. European stocks tumbled over 3%, with Russian markets leading losses after a delayed opening.

Against this backdrop, the safe-haven demand lifted the US dollar nearly across the board. The USD index exceeded the 97.00 figure, adding more than 1% on the day. The index advanced to late-January highs around 97.25. Should this intermediate barrier give up anytime soon, this year’s peaks in the 97.45 area could be challenged as risk aversion will likely continue amid geopolitical developments. According to the latest updates, Ukrainian border officials reported that the Russian military was trying to break into the Kyiv region.

Elsewhere, fresh data showed that the annualized US GDP growth in the fourth quarter was revised to 7% in its second estimate from 6.9% in its initial estimate, in line with the market expectation. A separate report showed US initial jobs claims arrived at 232,000 versus the 235,000 estimates. However, the dollar showed no immediate reaction to the data and was last seen clinging to the upper end of the extended trading range. 

As safe-haven flows continue to dominate the financial markets on the back of the Russia-Ukraine military conflict, the greenback could extend the ascent towards the mentioned 2022 highs. If the 97.45 zone is cleared, the USD would target mid-2020 highs around 97.60, followed by the 98.00 mark. On the downside, the immediate significant support now arrives at 97.00.