SINGAPORE — The euro took a breather on
Wednesday ahead of this week’s central bank meeting, while
commodity currencies eased from recent peaks as investors
reckoned war-driven surges in energy, grains and metals could
end up crimping demand in the long run.
The euro was steady in early trade and has
recovered to $1.0898 from Monday’s 22-month low of $1.0806,
helped by a Bloomberg News report which citied unnamed officials
and the European Union was discussing joint bond issuance.
Such a move could mean stimulus and a step toward a fiscal
union. But details were scant and analysts also said the euro is
unlikely to rise much while there is so much worry about the war
in Ukraine spreading. Fighting has not abated.
Sterling, which has been sold along with the euro, has
barely recovered and was pinned near a 16-month low at $1.3100.
The US dollar index is just below a 22-month peak
“Our near-term pessimism is driven by a view that investor
fears that the war could extend beyond the Ukraine’s borders
will not dissipate quickly,” said Standard Chartered’s global
head of G10 FX research, Stephen Englander.
He expects the euro will fall to $1.06 by the end of the
quarter before slowing creeping toward $1.14 by year’s end if
some kind of agreement to contain fighting is reached, but said
it would probably fall below parity if the war were to spread.
The European Central Bank meets on Thursday with the specter
of stagflation prompting economists to figure that policymakers
might delay rate hikes until late in the year.
Enthusiasm for commodity currencies as surging export prices
boost terms of trade also appears to be wavering since sky high
raw material costs also act as a tax on consumers and a brake on
The Australian dollar, steady at $0.7274 on
Wednesday, is about 2% below Monday’s four-month high of
$0.7440. The kiwi, at $0.6809, is about 1.7% beneath
its Monday top.
“Market participants may switch their view from ‘buy
Australian dollars because commodity prices are high’ to ‘sell
Australian dollars because very high commodity prices will cause
demand destruction,’” said Commonwealth Bank of Australia
strategist Carol Kong.
“It is still possible AUD/USD tests $0.7000 before the
impact of the war subsides.”
Surging oil costs are also dulling the luster of the yen as
a safe haven, since import spending propelled Japan to its
largest current account deficit since 2014 in January. The yen
touched a three-week low of 115.87 on Wednesday.
Russia’s onshore currency market is expected to open for the
first time this week at 0700 GMT.
The rouble, along with other Russian assets, has
taken a drubbing since Russia launched what it called a “special
military operation” last month, and fell as low as 160 per
dollar in offshore trade this week, last recovering to 130.
Currency bid prices at 0045 GMT
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $1.0902 $1.0894 +0.07% -4.11% +1.0906 +1.0890
Dollar/Yen 115.8250 115.6300 +0.21% +0.74% +115.8650 +115.7000
Dollar/Swiss 0.9296 0.9288 +0.09% +1.91% +0.9302 +0.9294
Sterling/Dollar 1.3100 1.3102 +0.02% -3.11% +1.3104 +1.3091
Dollar/Canadian 1.2880 1.2891 -0.08% +1.88% +1.2894 +1.2880
Aussie/Dollar 0.7274 0.7273 +0.03% +0.08% +0.7279 +0.7265
NZ 0.6811 0.6807 +0.04% -0.50% +0.6811 +0.6800
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook. Editing by Lincoln Feast.)