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LONDON  - The euro edged up on Friday following Thursday's sharp declines in the wake of Russia's invasion of Ukraine.

The dollar edged lower against most currencies as markets walked back some of the tumultuous moves from the previous day.

Russia's rouble also recovered some ground, trading at around 83.5 per dollar, having hit a record low of 89.986 the day before.

"FX markets are slightly calmer this morning as the world tries to come to terms with war in Europe," Chris Turner, Global Head of Markets at ING, said.

The size and prominence of the sanctions on Russian banks and the size of their FX deposits may take some time to percolate through, he said.

The United States, the European Union and some other countries responded to Russia's invasion of Ukraine with a wave of sanctions impeding Russia's ability to do business in major currencies along with sanctions on banks and state-owned enterprises.

Currency traders were trying to assess the impact on monetary policy around the world.

Policymakers at the European Central Bank (ECB) said the situation in Ukraine could cause the ECB to slow its exit from stimulus measures.

Investors now expect the ECB to increase its benchmark interest rate by 35 basis points by the end of December. Earlier last week, they saw the ECB raising rates by 50 bps by December. [IRPR]

Meanwhile, investors and some U.S. officials said the war would likely slow but not stop approaching interest rate hikes.

James Malcolm Head of UBS FX Strategy said he was surprised how little the euro sold off relative to the European stock market after the attacks, which were currently seen largely as a "European shock".

"If this does spiral more out of control and becomes a bigger risk-off event globally and affects central bank pricing... any spillover from less Fed (Federal Reserve) pricing is going to affect DOLLAR/YEN certainly more than EURO/SWISS (franc)," he said.

The euro fell to its lowest level in seven years on Thursday versus the safe-haven Swiss franc. The single currency was last 0.1% higher on the day at 1.0373. It was also 0.1% higher against the dollar at $1.1204, having touched its lowest of $1.1106 since May 2020 in the previous session.

The dollar index against a basket of currencies including the euro fell 0.1% on Friday to 96.981, after climbing to its highest level since June 2020.

Bitcoin joined the recovery, up 1.1% to $38,817.