The US dollar climbed to a new two-decade high on Wednesday after Russia said it was mobilizing 300,000 military stockpiles in an escalation of the war in Ukraine.
In a televised national address on Wednesday, President Vladimir Putin announced an immediate partial mobilization of Russian citizens and threatened to use “all means at our disposal” to defend Russia “and our people”. He also mentioned the possible use of nuclear weapons.
The speech pushed the dollar up 0.4 percent against a basket of major currencies to its strongest level since 2002. Investors often seek safe haven U.S. dollar assets during times of geopolitical tension.
Oil prices also soared. Brent crude futures, the global benchmark, rose 2.5% to just below $93 a barrel.
Russian shares fell 3.5 percent on Wednesday after the announcement, extending deep losses on Tuesday after Putin threatened to hold referendums on annexing parts of Ukraine still held by Russian forces. The ruble also fell nearly 3% against the US dollar.
Asian shares fell. While indices in Europe fell initially, they were flat or slightly higher in morning trade ahead of the Federal Reserve’s latest policy announcement.
The euro initially fell 0.7 percent to 98 cents ($0.97) against the U.S. dollar, but has since rallied. The currency, used by 19 European countries, sank below the dollar in late August, rocked by soaring inflation and an energy crisis sparked by Russia’s invasion of Ukraine in February.
The war has increased anxiety for investors as it makes it harder to predict when inflation will ease and could prompt central banks to maintain an aggressive stance for longer.
— Tara Subramaniam and Andrew Raine contributed reporting.
