Peter Nurse

Investing.com: The U.S. Dollar fell Wednesday due to signs of progress between Ukraine and Russia in peace negotiations. This boosted risk sentiment, which was detrimental for the safe haven of the euro and the benefits of the Euro. Meanwhile the Japanese yen gained on concerns of government intervention.

The, which measures the greenback’s value against six currencies in a basket, was 0.3% less at 98.170 ET (3:55 GMT).

In addition, the stock rose 0.3%, to 1.1116, following Russia’s Tuesday promise to reduce its military operations near Kyiv. Also, Ukraine offered to adopt a neutral status. This is a move that offers hope of progress toward resolving the conflict between these two countries, after the face-to-face talks in Istanbul.

Recent weeks have seen the euro suffer from fears of economic collapse due to the conflict in Ukraine.

That said, these gains for the single currency could be short-lived amid skepticism over Russia’s intentions as well as the sharp gains in U.S. Treasury yields as traders position for aggressive tightening by the U.S. Federal Reserve.

“EUR/USD is now looking overvalued in the short-term after the pair failed to correct sharply on the back of the significant widening in USD-EUR short-term swap rate differential,” said analysts at ING, in a note. “We estimate the current short-term fair value in the 1.07/1.08 area at the moment.”

Elsewhere, dropped 0.9% to 121.72, retreating after recent sharp gains on the back of the Bank of Japan buying bonds this week to defend its 0.25% 10-year yield target, maintaining its very accommodative stance in the face of monetary policy tightening by a number of the world’s central banks, and the Fed in particular.

A meeting between Bank of Japan Governor Haruhiko Kuroda and Prime Minister Fumio Kishida raised speculation that the country’s senior officials are concerned with the extent of the drop in the yen. 

“We think the yen remains highly vulnerable as long as bond yields continue to press higher,” added ING. “More indications that Japan is taking action to curb JPY volatility could offer some support, but that appears to be a secondary factor.” 

Expectations are growing that the Fed will raise rates by a half-point rather than the customary quarter-point increase when it next meets, and traders will look at today’s data dump for confirmation.

The March data will be available Wednesday, 12:15 GMT, with consensus predictions looking for 450,000 job growth. Meanwhile, the Fourth Quarter, which is scheduled to release at 8:30 ET on Thursday, should show 7.1%, which is well beyond the 2.3% previous release. 

The perception of progress in Ukraine’s peace talks aided the 0.3% increase to 1.3121. The Bank of England is expected to continue raising interest rates in order to fight inflation.

While the 0.3% increase to 0.7527 was just above recent peak, it fell 0.1% at 6.3564.