Dollar Soars as Putin Ramps Up Tensions; Fed Meeting Looms

By Peter Nurse

Investing.com - The U.S. dollar rose in early European trading Wednesday, climbing near a 20-year high as Russian President Vladimir Putin raised tensions over Ukraine, and traders awaited another substantial Federal Reserve interest rate hike.

At 03:00 ET (07:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.5% higher at 110.457, close to the two-decade peak of 110.79 reached earlier this month.

Russian President Vladimir Putin declared mobilization of the country's 2 million strong military reserve in a recorded video address earlier Wednesday, confirming his intention to annex those parts of Ukraine currently under Russian occupation.

Putin also raised the geopolitical temperature, making a thinly veiled threat to use the country's nuclear arsenal to defend his conquests in Ukraine, at the same time accusing the West of practicing "nuclear blackmail" against it.

"If Russia’s territorial integrity is threatened we will use all means at its disposal. This is not a bluff," Putin said.

The euro felt the brunt of the losses, with EUR/USD falling 0.7% to 0.9903, falling close to its lowest level just below 0.99 since near the start of September.

The dollar has also benefited from the widely held expectation that the U.S. Federal Reserve will announce an interest rate increase of at least 75 basis points later Wednesday as it attempts to combat stubbornly high inflation.

That said, a full percentage point hike is not completely out of the question as last week’s consumer price index showed inflation remaining near 40-year highs.

"There seems no reason for the Fed to soften the hawkishness shown at the recent Jackson Hole symposium and a 75bp 'hawkish hike' should keep the dollar near its highs of the year," said analysts at ING, in a note.

These expectations pushed yields on the 2-year U.S. Treasury notes up to 3.992% overnight, the highest since 2007, while yields on the benchmark 10-year Treasury rose to 3.604%, the highest since 2011.

USD/JPY fell 0.1% to 143.64, with the yen’s safe haven status helping the Japanese currency even as the rising Treasury yields ramped up the pressure. The yen has dropped around 20% against the dollar this year.

The Bank of Japan holds a policy meeting on Thursday and is widely expected to keep its ultra-easy stimulus settings unchanged even as data released Tuesday showed Japan's core consumer inflation rising to 2.8% in August, hitting its fastest annual pace in nearly eight years.

GBP/USD fell 0.4% to 1.1338, dropping to a new 37-year low of 1.1351 as concerns about Putin’s intentions outweighed the probability of another interest rate hike by the Bank of England on Thursday.

The risk-sensitive AUD/USD fell 0.5% to 0.6658, while USD/CNY rose 0.5% to 7.0509, remaining above the psychologically important 7 level.

Begin trading today! Create an account by completing our form

Privacy Notice

At One Financial Markets we are committed to safeguarding your privacy.

Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.

Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.

Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.

By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Back to top

Office network
  • London Office
    One Financial Markets 

    1 Finsbury Market
    London
    EC2A 2BN
    United Kingdom


    T:  + 44 ( 0 ) 203 857 2000
    E:  info@ofmarkets.com
  • Dubai Office
    One Financial Markets 
    OT19-39 Central Park Tower
    Dubai International Finance Centre
    Dubai
    United Arab Emirates
     
    T: + 00 971 44 22 888
    E:  info@ofmarkets.com
     

One Financial Markets is the trading name of Axi Financial Services (UK) Ltd, a company registered in England with company number 6050593. Axi Financial Services Ltd is authorised and regulated by the Financial Conduct Authority in the UK (under firm reference number 466201) and the Financial Sector Conduct Authority in South Africa (with FSP number 45784).

The information on this site is not directed at residents of the United States, Belgium, Poland or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

www.onefinancialmarkets.com is owned and operated by Axi Financial Services (UK) Ltd.

Award winning broker
We have been presented with a number of awards that recognise the quality of our service and dedication to our clients :

Best FSA Regulated Broker
Saudi Money Expo

Best Education Product
Saudi Money Expo

Best Broker - Online Trading
IAIR Awards

Best Institutional Broker
Saudi Money Expo

Best FX Services Broker
CN Forex

Top International
FX Broker 2015

Saudi Money Expo

Broker of the Year
Online Trading – Middle East

IAIR Awards

Best Forex
Customer Service 2018

JFEX Awards

We accept the following payment methods: