Dollar gains as Ukraine worries rise, Bullard reiterates rate comments

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  • Bullard reiterates call on rate hikes
  • Euro seen as vulnerable to possible escalation
  • Dollar index at two-week high

NEW YORK, Feb 14 (Reuters) - The U.S. dollar index reached a two-week high on Monday on growing worries about Russia-Ukraine tensions and as St. Louis Federal Reserve President James Bullard reiterated calls for faster U.S. Federal Reserve interest rate hikes.

The index briefly jumped further in afternoon trading after Ukraine President Volodymyr Zelenskiy urged Ukrainians to fly the country's flags from buildings and sing the national anthem in unison on Feb. 16, a date some Western media have cited as the possible start of a Russian invasion. read more

The comments spooked investors, who have fled to the safe-haven dollar amid the escalating geopolitical problem, but the dollar index quickly came off those highs.

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Ukrainian officials said Zelenskiy was not predicting an attack on that date, but instead responding with skepticism to foreign media reports.

United Nations Secretary-General Antonio Guterres said he was deeply worried about "increased speculation" about a military conflict, and urged world leaders to step up diplomacy to calm the situation. read more

Washington had said Russia could invade Ukraine "any day now," and British Prime Minister Boris Johnson on Monday called the situation "very, very dangerous."

"The big driver clearly is tensions in the Ukraine. Markets are in risk-off mode across the board. Implied volatilities are up," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

The dollar index was last up 0.4% at 96.3090 after reaching 96.4410, its highest since Feb. 1.

The dollar was little changed against the Japanese yen at 115.57 , while the dollar was also nearly flat against the Swiss franc at 0.9252 franc. .

Earlier Monday, Bullard also said four strong inflation reports in a row warranted action and that the central bank needed to "ratify" market expectations of its upcoming moves. read more

Last week's stronger-than-expected U.S. consumer price index report has driven speculation the Fed might raise rates by a full 50 basis points in March.

"Clearly we still have the after shocks of last week's inflation report and St. Louis Fed president Bullard's comments," Schamotta said. "We have traders positioning for a front-loaded tightening cycle."

The move into safe-haven assets has overshadowed expectations for monetary policy tightening from the European Central Bank. ECB President Christine Lagarde also recently reiterated that any policy action would be gradual.

Against the dollar, the euro was down 0.4% at $1.1301.

The Fed will release its January meeting minutes on Wednesday.

In cryptocurrencies, bitcoin was up 0.2% at around $42,169 .

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Currency bid prices at 4:27PM (2127 GMT)

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Additional reporting by Stefano Rebaudo, Editing by Andrew Heavens, Alexander Smith and Richard Chang

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