US dollar holds steady

Dollar pares gains as West imposes sanctions

Currency markets had plenty of intra-day volatility overnight, bounced around on Ukraine headlines and Russian sanctions. Ultimately, the softer than expected sanctions won the day and the US dollar gave back all its early session gains, with the euro and Australian and New Zealand dollars outperforming as arbiters of global risk sentiment. The dollar index finished 0.07% lower at 96.07, where it remains in Asia. A Japanese holiday will mute trading volumes in Asia today.

EUR/USD reclaimed 1.1300 as it rose to 1.1325, but the single currency faces formidable technical resistance at 1.1400 and is highly vulnerable to negative Ukraine headlines. GBP/USD rose to 1.3595 with support/resistance at 1.3550 and 1.3650. USD/JPY is at 115.00 and remains in a broad 113.50 to 116.50 medium-term range.

AUD/USD is holding onto its overnight gains at 0.7225 today with resistance at 0.7250. A 0.25% rate hike and seemingly hawkish RBNZ statement have lifted NZD/USD 0.40% higher to 0.6760. It is likely to perform better versus the Australian dollar and Japanese yen than the greenback, which will inevitably rise if eastern Europe gets worse.

Asian currencies spent yesterday under pressure unsurprisingly, with the baht, won and Indonesian rupiah among the worst performers. USD/CNY looks set to retest 6.3200 with the yuan becoming something of a fashionable haven currency right now apparently. For the rest of Asia though, regional currencies have failed to recoup any of yesterday’s losses and in the rupiah and ringgit’s cases, have continued weakening. That is yet another warning that global investor sentiment remains very cautious and that any relief rallies are likely to be short-lived.

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