The unloved euro catches its breath in front of the ECB

SINGAPORE, March 9 (Reuters) – The struggling euro paused on Wednesday ahead of this week’s central bank meeting as commodity-linked currencies eased from recent highs as investors believed war-induced surges in energy, grains and metals could weigh on long-term demand. .

The euro hovered around $1.0913 in Asia, its modest recovery from Monday’s 22-month low of $1.0806, helped by a Bloomberg News report that cited unnamed officials and said that the European Union was discussing a joint bond issue.

Such a decision could mean a stimulus and a step towards a fiscal union. But details were scarce and analysts also said the euro is unlikely to rise much amid widespread concern over the spread of war in Ukraine.

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The fighting has not let up and oil futures are climbing again on news of a US ban on Russian oil. Read more

The pound, which sold off with the euro, barely rallied and was pinned near a 16-month low at $1.3120.

The US Dollar Index is just below a 22-month high at 99.015.

“Our short-term pessimism is driven by the idea that investors fear the war spreading beyond Ukraine’s borders will dissipate quickly,” said Stephen Englander, global head of research G10 FX. at Standard Chartered.

He expects the euro to fall to $1.06 by the end of the quarter before slowly closing in on $1.14 by the end of the year if some sort of deal to contain the fighting is concluded, but said it would likely fall below parity if the war were to expand.

The European Central Bank meets on Thursday with the specter of stagflation prompting economists to believe policymakers could delay rate hikes until the end of the year. Read more

The commodity currency craze, as soaring export prices boost the terms of trade, also appears to be waning as exorbitant commodity costs also act as a tax on consumers and a drag to global growth.

The Australian dollar, steady around $0.7285 on Wednesday, is around 2% lower than Monday’s four-month high of $0.7440. The kiwi, at $0.6814, is around 1.6% below its high on Monday.

“Market participants could shift their view from ‘buy Australian dollars because commodity prices are high’ to ‘sell Australian dollars because very high commodity prices will lead to demand destruction'”, said Carol Kong, strategist at Commonwealth Bank of Australia.

“There is still a possibility that AUD/USD will test $0.7000 before the impact of the war subsides.”

Soaring oil prices are also dampening the yen’s shine as a safe haven, as import spending propelled Japan to its largest current account deficit since 2014 in January. The yen hit a three-week low of 115.87 on Wednesday.

Russia’s onshore foreign exchange market is expected to open for the first time this week at 07:00 GMT.

The rouble, along with other Russian assets, has taken a beating since Russia launched what it called a “special military operation” last month, and has fallen as low as 160 to the dollar in trade offshore this week, to climb back to 130 for the last time.

Cryptocurrencies rose on speculation that the White House might soften its combative approach to digital assets. Bitcoin was last up 7% at $41,600 and Ether was up 5% at $2,720.

US President Joe Biden is expected to sign a long-awaited executive order this week directing the Justice Department, Treasury and other agencies to study the legal and economic ramifications of creating a US central bank digital currency. , said a source familiar with the matter on Monday. . Read more

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Bid rates for currencies at 04:58 GMT

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Reporting by Tom Westbrook. Editing by Lincoln Feast and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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