Tom Westbrook

SINGAPORE, (Reuters) – The dollar and safer-haven currencies held steady while riskier ones lost traction Monday. This was due to traders being nervous about war in Europe and the uncertainty posed by soaring inflation.

Fear of war in Ukraine has pushed the euro downwards on Friday. It was trading at $1.1346 Monday morning, well below last weeks high of $1.1495.

Australian and New Zealand Dollars were also lower than last week. The Russian Ruble struggled after suffering from sanctions, which prompted its steepest drop in two years.

After a 5-week low of 116.234 last week, the safe-haven Japanese yen rose to 115.53yen.

The United States stated on Sunday that Russia could invade Ukraine at any moment and may create an unexpected pretext to attack. German Chancellor Olaf Scholz is heading to Kyiv Monday for talks and Moscow Tuesday afternoon. Scholz warned against sanctions in the event that Moscow invades.

Flashpoints add to the stress already apparent in the markets’ volatile reaction to U.S. Inflation data last week. This unleashed bets that the Federal Reserve would raise rates 160 basis points or more before the year ends.

Analysts at Westpac stated that “Fed hike expectations are rising again” and geopolitical tensions escalating in Ukraine, they should get back on the front foot.

The Asia session saw the dollar index rise to 96.059. Analysts view the riskiest currencies for conflict in Ukraine as the euro (which dropped 1.2% on Friday against the yen) and oil importers’ currencies. The oil prices are on the rise.

CNBC will air Christine Lagarde from the European Central Bank on Monday. James Bullard of St Louis Fed, the President of St Louis Fed, makes a speech to the European Parliament. Bullard’s hawkish comments last week in the aftermath the inflation data have rattled markets.

Sterling was steady at $1.3542 Monday because investors believe the Bank of England will raise rates next month. They also price about a 40% chance of an additional 50 basis points.

New Zealand’s dollar dropped 0.5% to $0.6622, while the Australian dollar fell 0.2% to $0.7119. [AUD/]

Australian job data will be released on Thursday. The risk of surprise drove dollar volatility gauges up to almost one-year highs.

Wednesday’s U.S. Federal Reserve meeting minutes for January are available.

Talk of an inter-meeting increase was put to rest last week when the Fed published an unchanged plan for bond buying in the coming month. The Fed previously stated that it would not raise its borrowing until the purchase has ceased.

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Prices for currency bids at 0438 GMT

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

Previous changes

Session

Euro/Dollar

$1.1346 $1.1346 +0.01% -0.19% +1.1369 +1.1331

Dollar/Yen

115.5000 115.5000 +0.04% +0.46% +115.5900 +115.3000

Euro/Yen

131.05 130.97 +0.06% +0.56% +131.3900 +130.8300

Dollar/Swiss

0.9258 0.9255 +0.03% +1.49% +0.9258 +0.9248

Sterling/Dollar

1.3541 1.3561 -0.15% +0.12% +1.3571 +1.3535

Dollar/Canadian

1.2730 1.2739 -0.09% +0.66% +1.2745 +1.2721

Aussie/Dollar

0.7117 0.7137 -0.25% -2.06% +0.7150 +0.7116

NZ

Dollar/Dollar 0.6620 0.6653 -0.47% -3.25% +0.6649 +0.6614

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