The US dollar climbed to a new two-decade high on Wednesday after Russia said it was mobilizing 300,000 military reserves in an escalation of the war in Ukraine.
In a televised national address Wednesday, President Vladimir Putin announced an immediate partial mobilization of Russian citizens and threatened to use “all the means at our disposal” to defend Russia “and our people.” He also referenced the potential use of nuclear weapons.
The speech pushed the greenback up 0.4% against a basket of major currencies to its strongest level since 2002. Investors often seek safe haven in US dollar assets during times of geopolitical tension.
Oil prices also jumped. Brent crude futures, the global benchmark, gained 2.5%, rising to just below $93 per barrel.
Russian stocks slid 3.5% Wednesday after the announcement, adding to heavy losses incurred Tuesday after Putin threatened to hold referendums to annex parts of Ukraine still occupied by Russian forces. The ruble also dropped nearly 3% against the US dollar.
Asian stocks pulled back. While indexes in Europe initially dropped, they were last flat or slightly higher in morning trade ahead of the Federal Reserve’s latest policy announcement.
The euro initially slumped 0.7% to hit 98 cents ($0.97) against the US dollar, but has since ticked upwards. The currency, used by 19 European countries, sunk below the dollar in late August, shaken by soaring inflation and the energy crisis triggered by Russia’s invasion of Ukraine in February.
The British pound dropped by 0.4% against the US dollar to just above $1.13, taking it to a fresh 37-year low, before recovering slightly.
The war has added to stress for investors, since it makes it harder to predict when inflation will ease and could push central banks to maintain an aggressive tack for longer.
— Tara Subramaniam and Andrew Raine contributed reporting.