Tom Westbrook

SINGAPORE, (Reuters) – The euro took a break on Wednesday in advance of the central bank meeting. Commodity currencies also eased slightly from their recent highs as investors considered that war-driven increases in energy, grain, and metals might end up crimping long-term demand.

Early trade was stable for the euro, which recovered to $1.0898 after Monday’s 22-month low at $1.0806. Bloomberg News reported that unnamed officials from the European Union were discussing joint bond issuance.

This could be a stimulus move and an important step towards a fiscal union. However, there were few details and analysts stated that it was unlikely for the euro to increase much given the concern about Ukraine’s war. The fighting hasn’t stopped.

Sterling has not recovered from the sale of the euro along with it and is now at its lowest level in 16 months, $1.3100.

It is below the peak of 99.090, which was 22 months ago.

Stephen Englander, Standard Chartered’s global head for G10 FX research and Standard Chartered’s near-term pessimism (OTC) stated that investors fear that war will extend to Ukraine.

According to him, the euro would fall to $1.06 in the fourth quarter and then slow down to $1.14 at year’s end if an agreement is made to end fighting. But he stated that the currency will probably drop below parity if war broke out.

With the threat of stagflation looming, Thursday’s European Central Bank meeting saw economists suggest that rate-hikers might hold off until the end of the year due to the possibility.

As surging commodity prices increase terms of trade, enthusiasm for these currencies seems to be waning. However, sky-high raw material costs act as both a tax and as a brake on global growth.

Australian dollars are steady at $0.7274 Wednesday. This is about 22% less than the Monday four-month high $0.7440. At $0.6809, the is just 1.7% lower than its Monday high. [AUD/]

Carol Kong of the Commonwealth Bank of Australia strategist Carol Kong said, “Market participants might switch from buying Australian dollars to compensate for high commodity price,” and she suggested that they could sell Australian dollars to offset high demand.

It is possible to test $0.7000, before the effects of war subside.”

The yen’s luster as a safety haven is also being affected by rising oil prices. In January, Japan experienced its biggest current account deficit in 2014 since 2014. On Wednesday, the yen fell to 115.87 after a three week low.

Russia’s Onshore Currency Market is set to Open for the First Time This Week at 0700 GMT.

Since Russia’s “special military operations” in October, the rouble and other Russian assets have been under severe pressure. It fell to 160 dollars offshore this week before recovering to 130.

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Exchange rate bids starting at 0045 GMT

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

Changes in the past

Session

Euro/Dollar

$1.0902 $1.0894 +0.07% -4.11% +1.0906 +1.0890

Dollar/Yen

115.8250 115.6300 +0.21% +0.74% +115.8650 +115.7000

Euro/Yen

126.27 126.01 +0.21% -3.11% +126.3400 +126.0100

Dollar/Swiss

0.9296 0.9288 +0.09% +1.91% +0.9302 +0.9294

Sterling/Dollar

1.3100 1.3102 +0.02% -3.11% +1.3104 +1.3091

Dollar/Canadian

1.2880 1.2891 -0.08% +1.88% +1.2894 +1.2880

Aussie/Dollar

0.7274 0.7273 +0.03% +0.08% +0.7279 +0.7265

NZ

Dollar/Dollar 0.6811 0.6807 +0.04% -0.50% +0.6811 +0.6800

All spots

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Volatilities

Tokyo Forex Market Information from BOJ