Ukraine tensions, Fed hike discuss drag on euro

By Alun John

HONG KONG (Reuters) – Tensions in jap Europe weighed on the euro on Tuesday and pushed demand for the greenback and the safe-haven yen, whereas the buck was additionally helped by debate about extra aggressive U.S. rate of interest hikes.

The euro was at $1.1308 in early Asia having touched $1.1278 the day earlier than, its lowest in a week-and-a-half. The yen was at 115.33 per greenback, after briefly hitting 114.99 on Monday, its strongest in per week.

Strikes had been barely extra cautious elsewhere and the general end result was that the greenback index, which tracks the buck in opposition to six friends was at 96.244, simply off Monday’s two-week excessive.

Buyers had been spooked considerably in a single day by Ukrainian President Volodymyr Zelenskiy calling on residents to fly the nation’s flags from buildings and sing the nationwide anthem in unison on Feb. 16, a date that some Western media have cited as a doable begin of a Russian invasion.

Ukrainian officers careworn, nevertheless, that Zelenskiy was not predicting an assault on that date, however responding with scepticism to international media experiences.

Away from geopolitics, U.S. Federal Reserve officers persevering with to spar over how aggressively to start upcoming rate of interest will increase at their March assembly.

Hawkish Fed official James Bullard, who final week broke ranks to name for a big 50 foundation level enhance, reiterated requires a sooner tempo of rate of interest hikes on Monday, although different officers had been extra cautious of their public remarks.

Tensions in Ukraine and the extra aggressive outlooks for the Fed funds fee are each supportive for the greenback within the close to time period, stated Kim Mundy, senior forex strategist at Commonwealth Financial institution of Australia.

“Your greatest wager for seeing which is having a higher impression is to take a look at USD/JPY and we’ve got seen that buying and selling somewhat bit weaker within the final day or two, which suggests markets are very acutely aware of what’s occurring on the Ukraine border,” Mundy stated.

“We simply need to preserve watching the headlines and see what occurs.”

The safe-haven yen usually advantages when buyers are nervous, whereas the distinction between U.S. rate of interest hikes and a dovish Financial institution of Japan should push the yen decrease.

The BOJ, final week, stated it could purchase an infinite quantity of 10-year authorities bonds at 0.25%, underscoring its resolve to forestall rising international yields from pushing up home borrowing prices an excessive amount of.

Buyers didn’t take a look at this 0.25% line on Monday.

Russia’s rouble remained risky however strengthened total on Monday, and gained 1.1%, although it was barely weaker once more in early Asia.

(Reporting by Alun John; Modifying by Sam Holmes)