By Alun John

HONG KONG, (Reuters) – The euro saw overnight gains in early Asian trading on Wednesday, as it jumped on news that Russian forces were leaving the Ukraine border. However, tensions remain high and the currency has not made further progress.

Russian Defence Ministry published Tuesday footage showing it returning troops to the base after conducting exercises. U.S. President Joe Biden however stated that they had not confirmed the move.

Further, Ukraine announced that its online network of defense ministry and banks was attacked hours after Moscow made the announcement.

On Wednesday, the common European currency was at $1.1356. It had risen 0.45% on Tuesday.

The reports prompted shares all over the world to rebound. MSCI’s index of global equities ended up 1.3%. The Australian dollar rose 0.37% Tuesday before stabilizing. This is a common sign that the Australian dollar is sensitive to risk sentiment.

The safe-haven yen, however, has softened slightly to 115.65/dollar, after briefly touching 114.99 Monday when tensions were high.

Globally, the that measures the greenback in relation to six major peers lost ground Tuesday night and was 96.008.

Analysts said that the dollar would not fall far enough.

According to Westpac’s morning note, analysts said that while the greenback lost ground as Ukraine’s geopolitical risk premium drew out markets overnight, however expectations of an aggressive Fed increase cycle should maintain a base for (dollar index).

Fed officials are expected to increase interest rates during its March meeting. This will probably kick off a fast program of rate hikes.

The yields of benchmark bonds in the United States were also higher due to increased producer price index data.

Last week’s yield of 2.0329 was the highest since 2002. It is now back close to its 2-year high, having fallen below 2% during tensions.

After the minutes from Fed’s February policy meeting, dollars and U.S. rate could change later in the day. The possibility of a rate increase by 50 basis points is being explored by investors.

Fed officials are arguing publicly over the pace at which they will raise rates during their March meeting. James Bullard, St. Louis Fed President, reiterated Monday that he supports a quicker rate of Fed rate increases.

Some Fed officials are less open to the idea of a half point hike or have expressed concern about its potential for trouble.

The British pound is also being supported by rate hikes, currently at $1.3543

A Reuters survey of economists found that nearly two-thirds of those surveyed expect the Bank of England (BoE) to increase rates 25 basis points during its March meeting. This would mark the Bank’s third consecutive rate increase at its March meeting since 1997.