Dollar Holds Steady Amid Trade Concerns and Diplomatic Moves on Ukraine

The U.S. dollar remained stable against most major currencies on Wednesday, while the Japanese yen gained as investors focused on developments in peace talks between Washington and Moscow and the potential escalation of U.S. trade policies under President Donald Trump.

Major Currency Movements

The dollar index edged slightly higher to 107.06 after declining 1.2% last week. Meanwhile, the Japanese yen rose 0.24% against the dollar to 151.675 yen. The euro weakened against the yen by 0.35%, reaching 158.415 yen, while it remained relatively steady against the dollar at 1.0443.

Ukraine Peace Talks Developments

The Trump administration announced on Tuesday its willingness to resume negotiations with Russia to end the war in Ukraine, despite Kyiv’s absence from the initial discussions. This marks a shift from the previous U.S. stance, which focused on isolating Moscow diplomatically.

Francesco Pesole, a foreign exchange strategist at ING, noted that markets are beginning to anticipate a potential peace agreement, increasing demand for the yen as a safe-haven currency at the expense of the euro, especially with the European Union excluded from the negotiations.

Potential Trade Escalation

Markets are also watching closely for Trump’s next move regarding trade policies. The former president has stated his intention to impose a 25% tariff on imports of cars, semiconductors, and pharmaceuticals—measures that could disrupt global trade.

Pesole highlighted that investors remain uncertain about whether Trump will follow through on these tariff threats.

UK Inflation Boosts Sterling

In the United Kingdom, official data showed inflation rising to 3% in January, its highest level in ten months. This could increase pressure on the Bank of England to take further action to stabilize the economy.

The British pound edged up 0.1% to 1.26150 against the dollar, hitting a two-month high before giving up some gains later. It also strengthened against the euro to 82.775 pence, supported by better economic expectations for the UK compared to the eurozone.

New Zealand Central Bank Decision

Meanwhile, the Reserve Bank of New Zealand cut its benchmark interest rate by 50 basis points to 3.75%, a widely anticipated move. The central bank signaled that future rate cuts might be less aggressive.