Euro Reaches Monthly-High vs USD, Yen Sees Recovery
USD fell to its lowest in almost two weeks on Wednesday, and the euro gained, with traders optimistic about peace talks in Ukraine, despite the warnings of damage to Europe's economy.
Russia promised on Tuesday to reduce its attack on Kyiv, but the US said it had not seen "signs of real seriousness" from Russia in pursuing peace. The dollar extended its losses on Wednesday, hitting a new low of 97.797. At 11.07 GMT, the dollar index was down 0.4% on the day at 97.993. The euro rallied against the dollar, up 0.4% at 1.113, having touched its highest in four weeks.
"Markets appear to have taken an optimistic stance well before peace talks have yielded any result. The FX market may be increasingly detached from trading the Russia-Ukraine situation and start to catch up with the wide moves in rate and growth differentials, all of which point to a stronger dollar”, ING FX strategists commented.
Investors expect the US Federal Reserve, which raised rates by 25 basis points at its March 16 meeting, to be more hawkish than the European Central Bank, driving the dollar higher against the euro. In Europe, data and policymaker warnings highlighted stalling growth, plummeting confidence and soaring inflation in light go the war in Ukraine.
The yen, on the other hand, has staged a recovery from its recent seven-year lows, after a meeting between Bank of Japan (BOJ) Governor Haruhiko Kuroda and Prime Minister Fumio Kishida added to speculation about the level of official discomfort with a falling yen. At 11.15 GMT, the dollar was down 0.9% on the day versus the yen, at 121.83.
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