Dollar Edges Lower; Risk Premium Lessens After Russian Troop Move By

By Peter Nurse

Investing.com – The U.S. dollar edged lower Wednesday, continuing the previous session’s selloff as news of the withdrawal of some Russian troops from the Ukraine border drained some geopolitical risk premium from the market. 

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 95.900, having fallen around 0.4% on Tuesday.

The change in risk sentiment followed Russia announcing it was returning to barracks some of its troops positioned near Ukraine after the completion of exercises.

rose 0.1% to 1.1365, having jumped 0.5% the day before, rose 0.1% to 115.67, with the safe haven yen weakening having briefly touched 114.99 on Monday, while the risk sensitive rose 0.3% to 0.7169.

That said, the dollar’s losses are fairly minor. NATO chief General Jens Stoltenberg, warned that the military alliance has so far “not seen any sign of de-escalation on the ground from the Russian side”, while Ukraine suffered a cyberattack on the online networks of its defense ministry and two banks.

“Nothing has changed on the ground in any meaningful way,” said the Mark Galeotti, an analyst with the Royal United Services Institute, via Twitter (NYSE:). “Putin could have invaded yesterday, he can still do so tomorrow.”

Additionally, traders are wary of fully deserting the greenback ahead of the release of the from the most recent Federal Reserve meeting, at which the policy makers in all likelihood discussed raising interest rates at its March meeting.

“While indications that the Ukrainian situation may be heading to a diplomatic solution could help pro-cyclical currencies recover and lift some support from safe-havens (including the dollar), we expect the narrative around frontloading of tightening by the Federal Reserve to put a floor under the dollar in the near term even if the geopolitical risk is priced out,” said analysts at ING, in a note.

Elsewhere, rose 0.2% to 1.3558, after British rose 5.5% in January, the fastest annual pace in nearly 30 years, up from December’s 5.4%.

The Bank of England has already raised interest rates twice since December in an attempt to combat this surging inflation, and a further rate rise from the current 0.5% is expected in March at the central bank’s next meeting.

fell 0.1% to 6.3350 after China’s factory-gate inflation slowed to its slowest pace in six months in January, thanks to government curbs bringing raw materials prices down.

The rose 9.1% year-on-year, slower than the 10.3% growth recorded in December 2021, while grew 0.9% year-on-year, compared with December’s 1.5% increase.