U.S. dollar firms on prospect of more sanctions over Ukraine

By Gertrude Chavez-Dreyfuss and Joice Alves

NEW YORK/LONDON (Reuters) – The dollar gained on Monday, rising for three straight sessions, as civilian killings in north Ukraine and the prospect of increased sanctions pushed investors to seek safety in the greenback.

The U.S. currency also continued to benefit from a strong non-farm payrolls report for March that backed expectations for a hefty half a percentage point tightening by the Federal Reserve at next month’s meeting.

“The dollar is bouncing higher as geopolitical developments have darkened clouds over the global economy,” said Joe Manimbo, senior market analyst, at Western Union (NYSE:WU) Business Solutions in Washington.

“The buck was already enjoying jobs-inspired gains after solid hiring and lower unemployment cemented expectations of super-sized U.S. rate hikes this year.”

French President Emmanuel Macron called for new sanctions and said there were clear indications Russian forces had committed war crimes in the town of Bucha.

The Kremlin denied any accusations related to the murder of civilians in the town.

German Defence Minister Christine Lambrecht said the European Union should discuss ending Russian gas imports. Russia supplies some 40% of Europe’s gas needs.

In late morning trading, the dollar, which measures the greenback against a basket of peers rose 0.3% to 98.89.

Data on Friday showed U.S. unemployment hit a two-year low of 3.6% last month, leading investors to assess if the numbers would strengthen the Fed’s resolve to tackle inflation by lifting rates sharply.

The euro, which has been under pressure due to worries about the economic damage from the war in Ukraine, fell 0.6% to 0.4% versus the dollar to $1.0988. Against sterling, the euro fell to a six-day low and it was last down 0.6% at 83.73 pence.

“More sanctions of course also mean that the risk of energy disruptions in Europe rises, because of our own sanctions or because Russia might get completely serious with its counter-sanctions rather than just changing the payment mode for natural gas,” said Ulrich Leuchtmann, Commerzbank (DE:CBKG) Head of FX.

“In my view the risk of significant euro weakness increases.”

Against the yen, the dollar rose 0.3% to 122.855 yen.

Kit Juckes, head of FX strategy at Societe Generale (OTC:SCGLY), said a 50bp rate hike was already priced in.

“CFTC data suggest the market has been rebuilding its long dollar position. That’s one reason the dollar is making heavy work of rising any further just now,” he said.

Speculators’ net long bets on the dollar rose to an 11-week high in the latest week.

Fed funds futures on Friday have priced an 80% chance of a 50 basis point hike next month, while two-year U.S. yields hit 2.4950%, their highest level since March 2019.

Markets in mainland China were closed for a public holiday, but in offshore trade the yuan was kept under pressure by concerns over a lengthening lockdown in Shanghai, where authorities are seeking to virus-test all 26 million residents.

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Currency bid prices at 10:40AM (1440 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 98.9310 98.6140 +0.34% 3.416% +98.9670 +98.5170

Euro/Dollar $1.0980 $1.1048 -0.59% -3.40% +$1.1054 +$1.0980

Dollar/Yen 122.8500 122.5450 +0.24% +6.71% +122.9450 +122.2800

Euro/Yen 134.89 135.32 -0.32% +3.51% +135.6800 +134.7700

Dollar/Swiss 0.9263 0.9256 +0.08% +1.55% +0.9281 +0.9247

Sterling/Dollar $1.3119 $1.3115 +0.02% -3.00% +$1.3136 +$1.3094

Dollar/Canadian 1.2486 1.2517 -0.24% -1.24% +1.2528 +1.2480

Aussie/Dollar $0.7522 $0.7498 +0.34% +3.49% +$0.7524 +$0.7483

Euro/Swiss 1.0169 1.0222 -0.53% -1.93% +1.0240 +1.0160

Euro/Sterling 0.8369 0.8422 -0.66% -0.37% +0.8430 +0.8370

NZ $0.6947 $0.6921 +0.39% +1.51% +$0.6954 +$0.6906

Dollar/Dollar

Dollar/Norway 8.6770 8.7425 -0.71% -1.47% +8.7615 +8.6515

Euro/Norway 9.5270 9.6572 -1.35% -4.85% +9.6744 +9.5052

 

Dollar/Sweden 9.4108 9.3683 -0.04% +4.36% +9.4490 +9.3556

Euro/Sweden 10.3341 10.3379 -0.04% +0.98% +10.3967 +10.3310