Euro rises on hopes of progress in Ukraine peace talks

London

THE euro rose on Tuesday on hopes of progress in peace talks between Ukraine and Russia, while the US dollar fell ahead of the Federal Reserve policy meeting.

One of Ukrainian President Volodymyr Zelenskiy's top aides said the war would be over by May - and could even end within weeks - as Russia had effectively run out of fresh troops to keep fighting.

Brent futures dropped to their lowest in almost 3 weeks as Russia indicated it is in favour of the Iran nuclear deal resuming as soon as possible, while ceasefire talks over Ukraine further eased fears of supply disruptions.

"This (the drop in oil price) reflects the hope that the talks between the Russian and Ukrainian negotiators might lead to an imminent and peaceful solution after all," Commerzbank forex analysts said in a note to clients.

Some analysts also flagged that a negative correlation between oil prices and the single currency increased recently.

The euro was up 0.5 per cent to 1.0999 against the dollar.

The single currency lost ground briefly after a survey showed on Tuesday German investor sentiment suffered a record slide in March, due to the war in Ukraine and economic sanctions on Russia, making a recession in Europe's largest economy "more and more likely".

The eurozone is far more dependent than other areas on Russian energy. However, the euro "today is mainly driven by sentiment around the Russia-Ukraine conflict", ING analysts said, adding that markets' approach to peace talks was "sanguine".

The US Federal Reserve is set to raise rates for the first time since the Covid-19 pandemic at its meeting which concludes on Wednesday (Mar 16), with traders looking for indications about the pace of future monetary tightening.

The US dollar index, which measures the greenback's value against other major currencies, fell 0.3 per cent to 98.828."The dollar is at pretty high levels. We would need a hawkish surprise from the Fed to see a further rise, but I think the bar is quite high for that," Matthew Ryan, senior market analyst at Ebury, said.

The yuan fell 0.2 per cent to 6.4075, after hitting its lowest level since October 2021 overnight of 6.4095. The Japanese yen rose 0.3 per cent after falling to a fresh 5-year low against the dollar at 118.44 overnight as the Bank of Japan is set to keep monetary policy ultra-loose. REUTERS