There has been a decline in interest in safe-haven assets in the forex market ahead of crucial discussions between the US and Russia next week.
The US dollar index (DXY) tends to move sideways under pressure at around 95.70 in early European trading today (18/February). Apart from the lack of information on the latest FOMC minutes, the greenback is also sluggish due to reduced interest in safe haven assets ahead of crucial discussions between US and Russian officials. However, the weakening of the US dollar and other safe-haven assets tends to be limited because the development of the next Ukraine crisis is still difficult to predict.
The US State Department said US Secretary of State Antony Blinken had accepted an invitation to meet with Russian Foreign Minister Sergei Lavrov next week, provided Russia did not invade Ukraine. This news eased market jitters that had surfaced since news broke of a clash between Ukrainian government troops and pro-Russian rebels in Donbass.
"A confirmed meeting between Blinken and Lavrov may mean market conditions remain stable through the weekend, but risk appetite is likely to be contained until the meeting (actually) takes place," said Derek Halpenny, analyst at MUFG.
“The tug-of-war from the Ukraine crisis continues to dominate the forex market, but investors have become wiser after the optimism that emerged amid early signs of de-escalation. The end result in the forex (market) is locking in major currencies further in a tight trading range," UniCredit analysts said in a note to clients cited by Reuters.
At the time of writing, EUR/USD is still consolidating around the 1.1370s for the third day in a row. USD/JPY recorded a daily strengthening to more than 0.2 percent, but also has not been able to offset the decline that occurred on the previous trading day. Commodity prices of crude oil and gold also experienced a limited correction following the circulation of this news.
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