Published by Jessica Weisman-Pitts
Posted on March 2, 2022
3 min readLast updated: February 8, 2026
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By Saqib Iqbal Ahmed and Caroline Valetkevitch
NEW YORK (Reuters) – The dollar edged higher against the euro on Wednesday, as investors worried about the impact of an escalating conflict in Ukraine on the euro zone’s economic prospects, while commodity-linked currencies strengthened.
The Russian rouble extended its recent slide to hit record lows in Moscow trade as stinging Western sanctions over Moscow’s invasion of Ukraine pummelled Russia’s financial system.
“Developments around the war in Ukraine will remain the main driver of euro price action for the session,” said Shaun Osborne, chief currency strategist at Scotia Bank.
“A continued escalation of conflict with no clear off-ramps for Russia is pulling the euro toward a test of 1.10 in the coming days,” Osborne said.
The euro was 0.3% lower against the dollar, after slipping to a fresh 21-month low of 1.1059, earlier in the session.
“We believe investors should underweight the euro area in both the currency and the equity space given its vulnerability to any further escalation,” analysts at JP Morgan said in a note on Wednesday.
Meanwhile, the U.S. Federal Reserve will move forward with plans to raise interest rates this month to try to tame inflation, even as the outbreak of war in Ukraine has made the outlook “highly uncertain”, Fed Chair Jerome Powell said on Wednesday.
“Judging from just his testimony… it’s pretty much in line with our view that the Federal Reserve is going to hike rates at the next meeting,” said Bipan Rai, North American head of foreign exchange strategy at CIBC Capital Markets, in Toronto.
The U.S. Dollar Currency Index, which tracks its performance against six major currencies, was up 0.3% at 97.604. The index climbed as high as 97.834, its strongest since June 2020, earlier in the session.
Data on Wednesday showed U.S. private employers hired more workers than expected in February and data for the prior month was revised sharply higher as the labor market recovery gathers steam.
Commodity-linked currencies, including the Canadian, the Australian and the New Zealand currencies were firmer as investors expect to benefit from higher commodity prices.
Oil prices jumped to near eight-year highs, wheat to 14-year peaks and aluminium, benchmark Dutch gas and European coal contracts hit record highs as Western sanctions on Russia over its invasion of Ukraine disrupted Russian commodities exports.
The Aussie was 0.19% higher, the kiwi rose 0.2%, while the loonie was 0.4% higher.
“Whether or not that continues depends really on whether or not we continue to see this move higher in oil prices,” CIBC Capital Markets’ Rai said.
The Canadian currency extended gains after the Bank of Canada on Wednesday raised interest rates by 25 basis points to 0.50% in its first hike since October 2018, and said it would continue with the reinvestment phase of its bond buying program.
A modest pick-up in investors’ appetite for riskier currencies kept the safe-haven Swiss franc and the Japanese yen pressured, with the dollar rising 0.2% against the franc and up 0.5% against the yen.
Bitcoin was 0.83% higher, on pace for its third straight day of gains, as some investors bet the cryptocurrency would benefit from increased volatility in financial markets.
(Reporting by Saqib Iqbal Ahmed and Caroline Valetkevitch; Editing by Tomasz Janowski)
Foreign exchange, or forex, refers to the global marketplace for trading national currencies against one another. It is the largest financial market in the world, facilitating currency conversion for international trade.
Interest rates are the amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal. They influence economic activity and can affect inflation and currency value.
A currency crisis occurs when there is a sudden devaluation of a country's currency, often due to economic instability, leading to loss of confidence among investors and potential capital flight.
Economic outlook refers to the projected future state of the economy, including growth rates, inflation, and employment levels. It helps businesses and investors make informed decisions.
Commodity-linked currencies are those whose value is closely tied to the prices of commodities, such as oil or gold. These currencies often appreciate when commodity prices rise.
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