Dollar gains as Ukraine worries rise, Bullard reiterates rate comments

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© Reuters. FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration
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By Caroline Valetkevitch

NEW YORK (Reuters) – The U.S. dollar index reached a two-week high on Monday, with the index briefly jumping after Ukraine’s President Volodymyr Zelenskiy commented on Russia and a possible invasion, adding to recent worries over tensions in the country.

Zelenskiy said he had heard that Wednesday could be the day of a Russian invasion, and would proclaim it a day of Ukrainian national unity instead. The leader has tended to play down suggestions that an attack is imminent.

The comment spooked investors, who have fled to the dollar and other safe-haven currencies amid the escalating geopolitical problem, but the dollar index appeared to quickly settle back to previous levels.

Washington earlier has said Russia could invade Ukraine “any day now,” and British Prime Minister Boris Johnson on Monday called the situation “very, very dangerous.”

“The big driver clearly is tensions in the Ukraine. Markets are in risk-off mode across the board. Implied volatilities are up,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

The dollar index was last up 0.4% at 96.3430 after reaching 96.4410, its highest since Feb. 1.

The dollar was up slightly against the yen at 115.56, while the dollar was flat against the Swiss franc at 0.9256 franc..

Also boosting the dollar index were comments earlier Monday from St. Louis Federal Reserve president James Bullard, who reiterated calls for a faster pace of U.S. Federal Reserve interest rate hikes.

Bullard also said that four strong inflation reports in a row warranted action.

Last week’s stronger-than-expected U.S. consumer price index report has driven speculation the Fed might raise rates by a full 50 basis points in March.

“Clearly we still have the after shocks of last week’s inflation report and St. Louis Fed president Bullard’s comments,” Schamotta said. “We have traders positioning for a front-loaded tightening cycle.”

The move into safe-haven assets has overshadowed expectations for monetary policy tightening from the European Central Bank. ECB president Christine Lagarde also recently reiterated that any policy action will be gradual.

Against the dollar, the euro was down 0.4% at $1.1296.

The Fed will release its January meeting minutes on Wednesday.

In cryptocurrencies, bitcoin was flat at around $42,080.

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Currency bid prices at 3:17PM (2017 GMT)

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

Previous Change

Session

Dollar index

96.3430 95.9330 +0.44% 0.711% +96.4410 +95.9040

Euro/Dollar

$1.1296 $1.1346 -0.44% -0.64% +$1.1369 +$1.1280

Dollar/Yen

115.5600 115.5200 +0.05% +0.40% +115.7450 +115.0200

Euro/Yen

130.53 130.97 -0.34% +0.16% +131.3900 +130.0500

Dollar/Swiss

0.9256 0.9255 +0.02% +1.48% +0.9272 +0.9239

Sterling/Dollar

$1.3524 $1.3561 -0.27% +0.00% +$1.3571 +$1.3495

Dollar/Canadian

1.2734 1.2739 -0.03% +0.72% +1.2784 +1.2720

Aussie/Dollar

$0.7122 $0.7137 -0.21% -2.02% +$0.7150 +$0.7087

Euro/Swiss

1.0454 1.0502 -0.46% +0.82% +1.0514 +1.0438

Euro/Sterling

0.8352 0.8369 -0.20% -0.60% +0.8386 +0.8347

NZ

Dollar/Dollar $0.6614 $0.6653 -0.62% -3.40% +$0.6649 +$0.6593

Dollar/Norway

8.8950 8.8700 +0.38% +1.07% +8.9490 +8.8695

Euro/Norway

10.0482 10.0607 -0.12% +0.35% +10.1251 +10.0321

Dollar/Sweden

9.3934 9.3273 +0.19% +4.16% +9.4499 +9.3030

Euro/Sweden

10.6122 10.5918 +0.19% +3.70% +10.6917 +10.5743