Leveraged funds’ net short positioning in the yen has increased in seven out of the last nine weeks and sits at its most bearish since November, according to Commodity Futures Trading Commission data released Friday. Net positioning in the Swiss franc, another preferred haven asset for currency traders, has been short since September, though it did grow less bearish in last week’s CFTC data. 

​The pullback from havens was evident in the spot market on Tuesday, when the Japanese and Swiss currencies retreated while other major counterparts gained against the U.S. dollar. The moves signal that the market is comfortable with where the Russia situation is going, Brad Bechtel, a strategist at Jefferies LLC in New York, said in a Tuesday note. 

“No real downside momentum in the JPY crosses on any of these recent Russia headlines the past few weeks,” he wrote. 

“Even now, as we are on the brink of the conflict, we still do not see JPY perform. Same with the USD and CHF,” he wrote, referring to the Swiss franc.

Eoin Treacy's view

The news flow from Ukraine is exciting but the trajectory of interest rates is much more important for markets. The defining characteristic of this earnings season was companies reporting better than expected figures for Q4 but disappointing on guidance. Home Depot was the latest example today. Markets are looking at slower growth and higher rates first and the wider geopolitical tension is a secondary concern.

The Yen is weakening because the Bank of Japan has stated they remain willing to continue to pursue their yield curve control policy. The ensures additional new supply of currency so there is less incentive to buy regardless of the geopolitical tension.

Gold continues to pause in the region of the psychological $1900 area. It is somewhat overbought in the short term so we may see consolidation.

One of David’s keenest observations was a crisis needs to be seen to get progressively worse for it to continue to have ill effects on asset prices. There appears to be a growing consensus that Russia’s forces will reside in the autonomous regions of Eastern Ukraine for a while. That does not imply imminent escalation even if fresh sanctions are being implemented.