Euro edges up as investors focus on Ukraine talks

London

THE euro rose on Thursday (Mar 17) with investors closely watching for developments in talks between Russia and Ukraine, while the Federal Reserve's monetary policy decision failed to affect the market as the bar for a hawkish surprise was high.

The Kremlin said Russia was putting colossal energy into talks on a possible peace deal with Ukraine. Meanwhile, Ukrainian President Volodymyr Zelenskiy has not altered his position that Ukraine's international borders must be recognised, an adviser said.

The euro was up 0.2 per cent at US$1.106, after touching a one week high of US$1.1067 earlier in the session.

"What is important for the foreign exchange market is whether the likelihood of an energy crisis decreases, which would be clearly inflationary and relevant to the exchange rate for many reasons," Commerzbank analysts said.

"A very fragile peace would perhaps only help moderately in this respect," they added.

The Russian rouble fell 16 per cent to 105.18 versus the dollar after hitting its highest since Feb 24 at 88.5 on Wednesday.

The Fed kicked off its monetary policy tightening with a quarterpercentage-point rate increase on Wednesday, while new projections showed policymakers ready to shift their inflation fight into high gear.

"Considering the very hawkish FOMC meeting, yesterday's market reaction was not particularly impressive, indicating that investors were already pricing in a rather aggressive hiking cycle," Unicredit analysts said.

The dollar index, which measures the greenback's strength against six trading currencies, was 0.2 per cent lower at 98.325 after hitting a one-week low of 98.151. Japan's yen eased 0.1 per cent to 118.63, within striking distance of its lowest since February 2016, hit on Wednesday at 119.12 as the Bank of Japan (BoJ) ruled out tightening monetary policy.

The pound weakened against the euro and the dollar after the Bank of England raised interest rates as expected, but softened its language on the need for further increases.

The Australian dollar rose 0.6 per cent to 0.7333 versus the green-back after employment sped past expectations in February as activity recovered surprisingly quickly from an Omicron outbreak. REUTERS