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Dollar near two-week high amid jitters over hawkish Fed, Ukraine tensions

Tuesday,   25-Jan-2022   08:48 AM (IST)

The safe-haven U.S. dollar hovered near a two-week high against its major peers on Tuesday amid escalating worries about both a faster pace of Federal Reserve policy tightening and potential military conflict in Ukraine. The Australian dollar rose briefly after strong consumer price numbers boosted the case for a Reserve Bank interest rate increase this year. The Fed begins a two-day policy meeting later in the global day, and investors will be anxious for any hints on the timing and pace of rate hikes, as well as about how fast the central bank will shrink its more-than $8 trillion holdings of Treasuries and mortgage debt. Money markets are priced for a first rate hike in March, with three more quarter-point increases by year-end. The dollar index , which measures the greenback against six major peers, edged up slightly to 95.920, after climbing as high as 96.135 overnight for the first time since Jan. 10. Markets until recently had mostly shrugged off the massing of Russian troops on Ukraine's borders, but tensions have ratcheted up lately. NATO said it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as an escalation of tensions. The euro slipped 0.08% to $1.1323, leaving it near the middle of its range of the past week. Overnight it fell as low as $1.1291 for the first time since Jan. 10. The dollar eased slightly to 113.87 versus fellow safe haven the yen , after recovering from a one-month low of 113.47 touched in the previous session. The Aussie traded 0.09% higher at $0.7150 after briefly climbing as much as 0.45% as a key inflation gauge jumped to a 7 1/2-year peak. Many analysts contend that such a pace will force the RBA into a rate hike this year, despite Governor Philip Lowe previously maintaining that such an eventuality was extremely unlikely. Money markets have long been at odds with the RBA's dovish stance, and are priced for a rate hike by June. Cryptocurrencies traded weaker, but were well off the lows tested at the start of the week. Bitcoin changed hands at close to $36,500, after dipping below $33,000 on Monday for the first time in six months. It has halved in value since touching a record $69,000 in November. Smaller rival ether last traded around $2,440, following its dive to a six-month low of $2,160.