Sun, October 02, 2022

Forex-Euro maintains gains; Tensions in Ukraine continues

Tensions, forex, euro, dollar,

Tensions in Ukraine continue affecting currencies. The safe-haven yen softened slightly and was last at 115.66 per dollar. It touched 114.98 on Monday when tensions were more elevated.

Overall, the dollar index lost ground on Tuesday and was at 96.009.

However, analysts stated the dollar was unlikely to drop too far.

The greenback fell overnight as the Ukraine geopolitical risk premium came out of markets. In a morning note to clients, Analysts at Westpac said that expectations of an aggressive Fed hike cycle should keep a base in place.

The Fed might raise interest rates at its March meeting, kicking off a pretty brisk hikes program.

Higher producer price index data supported send U.S. benchmark bond yields higher.

The yield on 10-year Treasury notes was last 2.0328, back near its two-year high after falling below 3% this week as tensions grew.

The dollar and U.S. rates could move later after the Fed’s February policy meeting minutes. Investors are looking to see if they discuss the possibility of a 50 basis point rate hike.

This week, Fed officials discuss how aggressively to raise rates at their March meeting.

Other Fed officials did not seem willing to commit to a half-point hike. They even appeared to be concerned it could cause trouble.

Rate hikes also support the British pound, which was at $1.3544.

Many respondents to a Reuters poll of economists expect the BoE to increase rates by a further 25 basis points at its March meeting. That would mark the first time it has raised rates at three meetings in a row since 1998.

Overview of the tensions and currencies

In the European morning, the euro held on to earlier gains against the dollar after news that the European Commission was considering easing travel restrictions to and from Ukraine. The moves came as tensions in the country continued to build, with reports that separatists had used military vehicles to attack a Ukrainian checkpoint overnight.

The dollar was up against the Japanese yen and the Canadian dollar. Overnight, the U.S. Treasury announced that it planned to sell $4 billion in 10-year notes at a yield of 2.23%, down from 2.38%.

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