The greenback rose on Thursday as a lack of progress in peace talks between Russia and Ukraine increased demand for safe-haven currencies and as the United States released the most oil from its emergency reserve in an attempt to cushion the impact of the war on energy demand.
In after-hours trading, the dollar index rose 0.492% to 98.31, weighing the greenback against a basket of six global peers.
As a result of Russia’s invasion of Ukraine on Feb. 24, the dollar has attracted safe-haven influxes, and it is on track for a rise of around 1.6% for the month of March, and around 2.8% for the first quarter.
What you should know
- Markets have been roiled by the month – and quarter-end flows, but they are likely to quiet down ahead of Friday’s non-farm payrolls report.
- President Joe Biden has announced that the U.S. will release from its Strategic Petroleum Reserve 1 million barrels per day of crude oil starting in May.
- According to Biden, the administration is coordinating releases with allies in the IEA to supply more than 1 million barrels per day to global markets.
- The hope that peace talks earlier this week would lead to a ceasefire in Ukraine five weeks after the country’s invasion has faded, as Ukrainian forces prepare for new attacks from the south of the country. On Friday, peace talks are expected to resume.
- Stock markets have fallen and commodity currencies have been hit by this risk-off reaction.
- As part of his effort to hit back against sweeping Western sanctions, Russian President Vladimir Putin said foreign buyers would have to pay for Russian gas in rubles beginning Friday.
- Governments and companies in the west have resisted any move to change gas supply contracts to a different payment currency. European buyers typically pay in euros.
- A rise in inflation in Europe stoked expectations of a rate hike, and the euro fell 0.8% to $1.1068, having hit a high of $1.1184 earlier in the session.
- As the outlook for euro zone inflation deteriorates as a result of the conflict in Ukraine, the ECB seems ready to change course.
That being said, the ECB is unlikely to make specific commitments on how to combat inflation until the energy crisis and considerable economic effects of the Ukraine war are no longer present. As a result, the euro will also take some time to appreciate on a sustainable basis.
