By Alun John

HONG KONG (Reuters – On Tuesday, the yen remained in pressure and the euro edged higher. Talks between Russian negotiators and Ukrainian negotiators were continuing. But moves were slower than usual as markets focused on this week’s Fed Meeting.

U.S. Federal Reserve has decided to increase rates for its first meeting since pandemic. Its meeting concludes Wednesday. Traders will be looking for signs about future rate increases.

According to Fedwatch, markets expect a 25-basis point increase at this meeting. However, pricing has increased to suggest a 70% chance that a bigger 50 basis points hike will occur at the next meeting in May. This is due to inflation concerns.

Carol Kong (OTC:), a FX strategist at Commonwealth Bank of Australia (CBA) stated that the “we think the statement of Chair Powell and the press conference following the meeting will have an influence in terms of market prices for a 50-basis point increase in May and beyond and that this will impact the U.S. Dollar intraday.”

The greenback was measured against six major peers at 98.881, a drop of 0.2% on the day, mainly because of losses against the euro. However, the remained within reach the 99.415 level touched last week, the highest since May 2020.

As its slide continued, the Japanese yen plunged to as low as 118.44 USD on Tuesday. It was at a 5-year record low.

As the Fed tightens, the contrast between high benchmark rates in America and low rates for Japan becomes more evident. This is especially true with the Fed meeting this week and both the Bank of Japan.

Bank of America (NYSE 🙂 has raised its dollar-yen forecast by 123 analysts in the third quarter of 2011.

A negotiated settlement of the Ukrainian war has influenced some markets to return to risk-averse sentiment. This support for Japan’s safe-haven currency also disappeared.

The fourth round was held by the Russian-Ukrainian delegations on Monday. But, there were no further developments. Talks are scheduled to resume Tuesday. This will give a boost for the euro which was already suffering from the economic impact of the conflict.

European currencies were up 0.3% to $1.0979. Experts point to lower oil prices as one factor, given Europe’s current dependence on Russian oil.

The Chinese yuan was also being watched closely by traders. A resurgence of COVID-19 cases clouded the country’s economic outlook. Meanwhile, Beijing faces increasing geopolitical risk from the Ukraine crisis.

This was the lowest level since December 10, 2021.

After falling 1.5% Monday due to a stop in the rise of commodities prices that sent it higher earlier in the month, Australian dollars were under pressure at $0.7181

Kong of the CBA stated that China’s situation also had a significant impact on his business.

Also, sterling was down to $1.3042, and cryptocurrencies saw bitcoin drop 2.25% to under $39,000