US Dollar index eases as investors digest news on Ukraine’s crisis

The US dollar was down slightly on Tuesday as investors absorbed the latest news on the Russia-Ukraine standoff, with the dollar index briefly paring some of its losses late in the day after President Joe Biden said that a Russian attack on Ukraine remains a possibility.

Biden, in nationally televised remarks, also said reports that some Russian forces have moved away from the Ukraine border have not yet been verified by the United States.

Earlier, Russia said that some of its troops were returning to base after exercises near Ukraine, news that appeared to reduce investor anxiety over the crisis in the region.

Concern over the standoff has driven gains recently in the safe-haven dollar, but investors mostly took a risk-on view on Tuesday, with US stocks rising.

The US dollar index was last down 0.3%, while the euro was up 0.5% against the dollar at $1.1358. The US dollar was up 0.1% against the yen at 115.64 and up 0.1% against the Swiss franc at 0.9255. The Russian rouble strengthened 1.80% versus the greenback at 75.32 per dollar.

Biden also said the United States is “not seeking direct confrontation with Russia” but that if Russia were to attack Americans in Ukraine, “We will respond forcefully.”

A general prevalent feeling of de-escalation on the Russia-Ukraine border, drove some underperformance in the dollar, although investors remain focused on developments in the region.

Traders and market participants will also remain alert to any comments this week from US Federal Reserve officials on the interest rate hike outlook.

Fed officials continue to spar over how aggressively to begin raising rates at their March meeting, with St. Louis Fed President James Bullard on Monday reiterating calls for a faster pace of Fed rate hikes. Other Fed officials have been less willing to commit to a half-point hike, or were even concerned it could cause trouble.

The key is really going to be what we hear from other Fed speakers later this week. That could be pivotal for markets this week.

The European Central Bank has joined its central bank peers in signaling a hawkish turn in its monetary policy at a meeting this month.

Sterling was about flat against the dollar at $1.3537. It had been rising amid expectations that the Bank of England was likely to raise interest rates again next month after lifting them twice since December.

Investors also assessed data showing US producer prices increased by the most in eight months in January. The data follows last week’s report showing a strong rise in consumer prices in January, with the annual inflation rate posting its largest increase in 40 years. In cryptocurrencies, bitcoin was up 3.6%.