Peter Nurse

Investing.com – The U.S. dollar edged lower Wednesday, continuing the previous session’s selloff as news of the withdrawal of some Russian troops from the Ukraine border drained some geopolitical risk premium from the market. 

After falling 0.4% Tuesday, the Dollar Index, which measures the greenback’s performance against six currencies, fell 0.1% to 95.900 at 2:55 AM ET (755 GMT).

This change in risk perception came after Russia declared that some of its troops near Ukraine would be returning to the barracks following completion of exercise.

Following a 0.1% increase to 1.1365 on the previous day, it rose 0.1% at 115.67. On Monday, the safe haven currency yen gained 0.3%, and the risk sensitive briefly reached 114.99.

Despite this, dollar losses have been relatively minor. NATO chief General Jens Stoltenberg, warned that the military alliance has so far “not seen any sign of de-escalation on the ground from the Russian side”, while Ukraine suffered a cyberattack on the online networks of its defense ministry and two banks.

Mark Galeotti from the Royal United Services Institute said that “nothing has changed on ground in any meaningful manner.” via Twitter (NYSE :). Putin can invade today, but he could do it yesterday.”

Traders also remain cautious ahead of Federal Reserve release, which will likely reveal that policy makers discussed increasing interest rates in March.

“While indications that the Ukrainian situation may be heading to a diplomatic solution could help pro-cyclical currencies recover and lift some support from safe-havens (including the dollar), we expect the narrative around frontloading of tightening by the Federal Reserve to put a floor under the dollar in the near term even if the geopolitical risk is priced out,” said analysts at ING, in a note.

The index rose 0.2% to 1.3558 in other places, following a 5.5% increase in British in January. It is now at the fastest pace of growth in 30 years.

In an effort to curb this rising inflation, the Bank of England raised interest rates twice in December. A further increase from 0.5% in March is possible at the next central bank meeting.

fell 0.1% to 6.3350 after China’s factory-gate inflation slowed to its slowest pace in six months in January, thanks to government curbs bringing raw materials prices down.

The rose 9.1% year-on-year, slower than the 10.3% growth recorded in December 2021, while grew 0.9% year-on-year, compared with December’s 1.5% increase.