Euro climbs on peace talks, overshadowing expected Fed rate hike

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NEW YORK/LONDON — The euro jumped on

Wednesday amid signs of compromise by Russia and Ukraine in

“more realistic” peace talks, while the dollar slid further from

almost two-year highs reached over the past week as markets

await a likely rate hike by the Federal Reserve.

A stronger euro overshadowed the dollar index that has

gained during the war in Ukraine. The Fed is expected to boost

its benchmark overnight rate by 25 basis points when it releases

a policy statement at 2 p.m. ET (1800 GMT), but the

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long-expected hike is unlikely to boost the greenback.

“It’s really a story about whether or not that geopolitical

premium is going to continue to be reduced,” said Bipan Rai,

North America head of FX strategy at CIBC Capital Markets.

“Going into the invasion a 25-beep hike was already priced

for March. If the Fed does deliver on that, I wouldn’t expect

much of an impetus for the dollar,” Rai said.

Signs of compromise sent relief through global financial

markets. The euro gained 0.63% to $1.102, while the

dollar index, a measure of its strength against six

trading currencies, fell 0.44%.

Moscow said the sides were discussing status for Ukraine

similar to that of Austria or Sweden, both members of the

European Union that are outside the NATO military alliance.

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Ukraine’s chief negotiator said it would give Kyiv binding

international security guarantees to prevent future attacks.

The Russian ruble strengthened 4.99% versus the

greenback to 108.20 per dollar.

Other European currencies, including the Swedish and

Norwegian crowns, found some support from the developments in

the talks.

“FX risk sentiment is buoyed by the super rallies in Asia

stock markets running into a less negative tone on European

geopolitics,” said Neil Jones, head of FX Sales at Mizuho Bank.

The Swedish crown was set for its best week

against the single currency since May 2020. It rose 1% to a

five-week high of 10.4275 after Riksbank Governor Stefan Ingves

said a rate hike may come sooner than 2024, as initially

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planned, amid surging inflation.

Sterling rose 0.46% to $1.3098, up from Tuesday’s

16-month low of $1.3000. Money markets expect the Bank of

England to raise rates by another quarter point on Thursday

.

The commodity-linked Norwegian crown rose about

1.0% versus the dollar to 8.903. The Aussie added 0.71%

to $0.7249.

The dollar stood at 118.27 yen, little changed

from Tuesday when it touched 118.450 yen for the first time

since January 2017.

Money markets are fully pricing a Fed interest

rate hike later in the day, while the Bank of Japan is expected

to leave ultra-loose policy settings in place when it reviews

its policy on Friday.

The offshore Chinese yuan fell 0.27% to $6.3634 per dollar.

China’s Xinhua news agency cited Vice Premier Liu He as saying

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the country will roll out policy steps favorable for its capital

markets.

Bitcoin last rose 3.75% to $40,926.54.

Currency bid prices at 10:44AM (1444 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 98.6660 98.9280 -0.25% 3.139% +99.0080 +98.3330

Euro/Dollar $1.0989 $1.0955 +0.32% -3.33% +$1.1040 +$1.0948

Dollar/Yen 118.2700 118.2900 -0.03% +2.72% +118.4250 +118.1700

Euro/Yen 129.98 129.57 +0.32% -0.28% +130.5600 +129.5400

Dollar/Swiss 0.9415 0.9414 -0.01% +3.20% +0.9415 +0.9391

Sterling/Dollar $1.3075 $1.3045 +0.28% -3.28% +$1.3116 +$1.3036

Dollar/Canadian 1.2730 1.2766 -0.29% +0.68% +1.2775 +1.2686

Aussie/Dollar $0.7249 $0.7198 +0.71% -0.28% +$0.7274 +$0.7181

Euro/Swiss 1.0345 1.0309 +0.35% -0.24% +1.0371 +1.0305

Euro/Sterling 0.8402 0.8398 +0.05% +0.02% +0.8429 +0.8394

NZ $0.6803 $0.6770 +0.57% -0.53% +$0.6827 +$0.6743

Dollar/Dollar

Dollar/Norway 8.9305 9.0145 -0.98% +1.32% +9.0090 +8.8720

Euro/Norway 9.8173 9.8725 -0.56% -1.95% +9.8809 +9.7780

Dollar/Sweden 9.4925 9.6043 -0.88% +5.27% +9.6338 +9.4163

Euro/Sweden 10.4330 10.5256 -0.88% +1.94% +10.5464 +10.3924

(Reporting by Joice Alves; Editing by Elaine Hardcastle,

Kirsten Donovan and Jonathan Oatis)