Russia-Ukraine Conflict Overshadowed by Uncertainty, US Dollar Choppy

The market did not overreact even though Russian President Vladimir Putin acknowledged the independence of Donetsk and Luhansk which are Ukrainian territories. The US dollar tends to be choppy.

The US dollar slipped slightly amid market focus on developments in the Russia-Ukraine conflict. At the time this news was written on Tuesday (22/February), the US Dollar Index was trading at 96.0 in the choppy movement area.

Russian President Vladimir Putin's recognition of the independence of the Donetsk and Luhansk People's Republics, two separatist regions of Ukraine, had sparked reactions from Ukraine and the Western bloc. But as long as there is no invasion, diplomacy is still possible. Nevertheless, the uncertainty of this conflict is still quite high and no significant progress is expected in the near future.

Safe haven currencies such as the Yen and the Swiss Franc which previously outperformed the US Dollar due to the heated issue of the Russia-Ukraine war are now starting to calm down. USD/JPY edged up to 104.905, while USD/CHF soared 0.55% to 0.9207.

Joseph Trevisani, a forex expert from FXStreet, said that currently Putin is in the main spotlight. However, the market took Putin's announcement in moderation, not with great fear that Western sanctions would destroy the economy or hinder global economic recovery.

"The games are still on and the markets know that. They don't expect any big changes in the current situation yet," Trevisani said.

US Economic Data So Consideration Next

In addition to the Russia-Ukraine crisis, the IHS Markits version of the US Manufacturing PMI and Services PMI released this evening provided some support for the US Dollar. US Flash Manufacturing PMI rose from 55.5 to 57.5, higher than expected 55.9. The US Flash Services PMI even increased from 51.2 to 56.7.

US business activity is currently stretching and accelerating because the surge in COVID-19 infections in the final quarter of last year has subsided. However, high prices are still a barrier because supply has not fully recovered.

This week's US economic data will be sufficiently watched by the market, especially because of its relation to the increase in the Fed's interest rate. The US central bank is expected to raise interest rates in March. Related to this, Federal Reserve Governor Michelle Bowman said that her party would review economic data in the next three months to determine the pace of US interest rate hikes.