By Gina Lee
Investing.com – The dollar was up on Wednesday morning in Asia, while the euro held on to overnight gains in early Asia Pacific trade. Investors also digested reports that Russia could move forces away from its border with Ukraine, alongside the latest economic data from China.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.05% to 96.045 by 10:54 PM ET (3:54 AM GMT).
The USD/JPY pair inched up 0.06% to 115.69.
The AUD/USD pair was steady at 0.7152 and the NZD/USD pair inched down 0.03% to 0.6637.
The USD/CNY pair inched up 0.01% to 6.3403. Chinese data released earlier in the day showed that China's consumer price index grew 0.9% year-on-year and 0.4% month-on-month in January, while the producer price index rose 9.1% year-on-year.
The GBP/USD pair inched up 0.05% to 1.3540.
The Russian defense ministry on Tuesday published footage to show it was withdrawing some troops from the border with Ukraine after exercises. However, U.S. President Joe Biden said that the U.S. had not verified the move, while Ukraine reported a cyber-attack on the online networks of its defense ministry and two banks mere hours after the Russian announcement.
The euro steadied at $1.1356 on Wednesday, after climbing 0.45% the day before, while global shares rebounded over expectations of a possible Russian withdrawal.
However, some investors were optimistic that the dollar’s losses would be capped.
The dollar "shed ground overnight as the Ukraine geopolitical risk premium came out of markets, but expectations of an aggressive Fed hike cycle should keep a base for the dollar index in place," said Westpac analysts in a note.
The U.S. Federal Reserve is widely expected to hike interest rates at its March 2022 meeting, with several more hikes also likely to follow throughout the year.
Investors now await the minutes from the Fed’s last meeting later in the day, which could influence the dollar and U.S. rates’ movements. The yield on benchmark 10-year Treasury notes was last at 2.0329.
A debate among Fed officials on how aggressively the central bank should hike interest rates also continues. St. Louis Fed President James Bullard on Monday repeated calls to speed up the pace of Fed rate hikes, but some of his colleagues are less keen to commit to a half-point hike or were even concerned it could cause trouble.
Across the Atlantic, the Bank of England could hike its own interest rates by a further 25 basis points at its March meeting, according to a Reuters poll of economists. The central bank last hiked rates at three consecutive meetings in 1997.