Traders are beginning to re-evaluate the impact of the Russia-Ukraine war on their strategies as conflict grinds into a fourth week. All eyes were on the dollar as markets reopened at 2 pm in New York (5 am Monday in Sydney), when the greenback held little changed against its major counterparts after the first weekly loss in a month, even as the US Federal Reserve hiked rates. Japan’s yen was also steady after hitting a six-year low.

Russian assets are again in the spotlight after the nation paid some dollar debts last week, a relief to investors who feared the nation would use rubles and thereby trigger a default. However, with the country on the hook for more foreign-currency payments in the coming weeks, the default risk remains significant. Trading in sovereign ruble bonds is poised to restart this week even as the nation’s stock market stays closed Monday.

Commodity-linked currencies are meanwhile set for further outperformance due to the high price of natural resources. Australia has banned shipments to Russia of alumina, the key ingredient for producing aluminum. Japan, a major oil importer, has asked the United Arab Emirates to increase crude exports.

Gauges of volatility in currencies, bonds and stocks have fallen in recent days as investors took heart from news that China did not want to see the invasion of Ukraine amid US warnings against supporting Russia. With a slew of central-bank meetings also in the rearview mirror, investors will be looking to rejigger their portfolios and parse the global effects of the Fed’s first rate hike since 2018, alongside last week’s decisions from the Bank of England and the Japanese monetary authority.

The next big question for investors is how many more hikes the Fed is planning for 2022 and what impact this will have on the US economic outlook, with increased concern about the recession following another inversion in the Treasury yield curve. A slew of Fed officials are set to speak this week, as are policy makers from the BOE and the European Central Bank.

The Bloomberg Dollar Spot Index finished last week down nearly 1%, with the greenback falling against all but one of its developed-market peers – the yen, which faces further losses after the Bank of Japan recommitted to keeping its monetary policy easy.

Meanwhile, Russian regulators are still exploring ways to reopen the country’s equity market, which has been closed since late February. The Bank of Russia will begin purchasing domestic sovereign bonds on Monday in an effort to stabilize that market as it reopens.

© 2022 Bloomberg LP

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