By Peter Nurse
Investing.com - The U.S. dollar edged lower Tuesday while the euro traded marginally above the previous session’s 22-month low as the war in Ukraine threatens the European growth outlook.
At 2:55 AM ET (0755 GMT), US Dollar Index, which tracks the greenback against a basket of six other currencies, traded just lower at 99.275, retaining its strength as a safe haven as the Russia-Ukraine conflict intensifies.
EUR/USD rose 0.1% to 1.0863, attempting something of a recovery after almost a week of selling, but remains near to Monday's low of 1.0806, suggesting any support is pretty half-hearted. The euro is down 4% against the dollar since Russia launched its invasion of Ukraine.
“How low could EUR/USD go? Support levels seem to be around the 1.0760/70 area and then the March 2020 lows of 1.0640 - but probably at times like these, big figures of e.g. 1.0500 become more relevant,” said analysts at ING, in a note.
And it’s not only the dollar that the single currency has seen hefty selling against, as it briefly traded at parity with the Swiss franc on Monday for the first time in seven years.
This prompted the Swiss National Bank to state that it is ready to intervene and address the rapidly strengthening franc.
The European Central Bank (ECB) meets on Thursday, but the single currency is unlikely to get support then as the likelihood of slowing growth in the region on the back of the Ukraine conflict and rising commodity prices could prompt the policymakers to delay rate hikes until late in the year.
The ECB is also unlikely to intervene by itself in support of the euro.
“Were things to get out of hand, we would think coordinated G5 intervention to support EUR/USD would be more likely than ECB own account intervention,” added ING. “But that may not occur until closer to parity.”
The Federal Reserve meets next week, and Chairman Jerome Powell last week backed a quarter-point rate increase while telling Congress he would move more aggressively later if inflation didn’t abate.
Elsewhere, USD/JPY traded 0.1% higher at 115.43, GBP/USD gained 0.1% to 1.3108, near a 16-month low, while AUD/USD dropped 0.4% to 0.7285, handing back some of its recent gains.
USD/RUB was indicated 4.1% lower at 130.00, with the ruble benefiting from the lack of solidity between Western governments on a move to ban Russia’s oil imports.
USD/PLN rose 0.1% to 4.5865 ahead of the latest policy-setting meeting of Poland’s central bank, which is expected to result in interest rates rising 50 basis points to 3.25%.
This move will help to support the zloty, which plunged to a record low against the euro as the fallout from Russia’s war on Ukraine spreads.