The US dollar reportedly surged to a new two-decade high on Wednesday, following Russian President Vladimir Putin's decision to mobilize more troops to tackle the conflict in Ukraine. At the same time, the market is also struggling with expectations of aggressive interest rate hikes by The Fed.
Putin today called up 300,000 reservists to fight in Ukraine and said Moscow would respond more broadly if the West continued what he called "nuclear blackmail" over the conflict there.
The report has pushed the US dollar to strengthen against other major currencies, up 0.60% to trade at 110.733. European currencies have received an impact from the strengthening of the US dollar, the performance of the Euro currency has fallen over 0.95% to a trading level of 0.9875. Sterling lost 0.45% to trade at 1.1328.
According to Societe Generale's currency strategist, Kenneth Broux, reports about Russia have worsened the situation. Concerns about an escalation in the conflict hurt European currencies. And if the Fed is also hawkish tonight then a worse performance can be expected for the Euro.
Early Thursday morning, the Fed is expected to raise interest rates by three-quarters of a percentage point for the third time in a row and give an indication of how much more interest rates need to be increased to reduce inflation.
The Australian and New Zealand dollars hit multi-year lows. The Aussie fell to a low of $0.6655. The market's focus is now on the FOMC meeting!
