US Dollar Rises After Russian Nuclear Weapon relocation

Russia has relocated its tactical nuclear weapons from its boundaries into Belarus, a neighbouring country that is several hundred miles closer to NATO territory. This was confirmed by Western officials to Foreign Policy.

This development was a reaction to NATO’s support of Ukraine, which has led Russian President Vladimir Putin to threaten a larger military confrontation.

Following the publication of this news headline about geopolitical tension, some buyers are drawn to the US Dollar Index (DXY). The index is staying higher and up 0.09% for the day at the time of writing, trading close to 103.45.

Key Quotes

“The Russians can reach any place in NATO with nuclear missiles with what they have on their own territory,” said Rose Gottemoeller, a former top US arms control envoy and deputy secretary-general of NATO.”

“It does not change the threat environment at all. So it is purely a political message.”

More About Recent US Dollar’s Performance

After a few quiet days, the US dollar rebounded on Thursday thanks to rising US Treasury yields and better-than-expected February PPI data, which were announced after Tuesday’s volatile CPI report.

The dollar’s gains were further reinforced by labour market statistics that showed the number of Americans requesting unemployment benefits remained at historically low levels last week, thereby boosting confidence in the nation’s economic prospects.

Despite the Fed’s indication that monetary policy restrictions would probably be lifted this year, the economy’s resilience in the face of stagnating disinflation could limit the extent of upcoming rate cuts and possibly postpone the current June start date of the easing cycle.

Next week, when policymakers convene for their March meeting and unveil revised macro projections (SEP), which include the dot-plot; a graphic that illustrates Fed officials’ expectations of how borrowing costs are expected to change over different years, investors wish to learn more about the FOMC’s monetary policy stance.

It is not surprising to traders that the central bank is signaling fewer rate reductions for 2024 than it did three months ago, given that upside inflation risks are beginning to materialize. In the short run, this scenario might maintain an upward tendency in bond yields, supporting the dollar’s bullish rebound.