Talks of European banning Russian gas placed a lid on the rise of the Euro even as the US dollar firmed up with expectations of a rise in U.S. interest rates.
The euro has been weighed down by worries of economic damage from the Russia-Ukraine war and was parked at $1.1047, close to last month’s two-year trough of $1.0806.
On Sunday, Germany had expressed that the West would agree to impose further sanctions on Russia in the coming days after Ukraine accused Russia of committing war crimes.
There appears to be a momentum, at least in discussions, on imposing an embargo on energy imports, which will come with price pains since Russia supplies some 40% of Europe’s gas needs.
“Negative news on the war or a further lift in energy prices could see EUR/USD test $1.0800,” said analysts at Commonwealth Bank of Australia in a note.
Incidentally, after the departure of Russian troops, the mayor had not said anything regarding the senseless killings of Ukrainians. Videos and images have flooded online portals showing dead bodies, with arms ties tied behind their back, with a white band tied to their hands.
Ukraine has accused Russian forces of carrying out a “massacre” in the town of Bucha, an accusation which was denied by Russia’s defence ministry.
The U.S. dollar index was steady around 98.587.
While markets in mainland China were closed for a public holiday, in offshore trade however, the yuan was under pressure over concerns over lengthening lockdowns in Shanghai, where 26 million residents are under lockdown to contain the spread of COVID-19.
The yen, which steadied last week after a pummelling through March on the expectation of higher U.S. interest rates against anchored Japanese yields, has been squeezed back below 122 per dollar and last traded at 122.59.
“The yen is not out of the woods,” said Jane Foley, a senior strategist at Rabobank in London. “Another prolonged bout of severe selling pressure on the yen could put pressure on the Bank of Japan to re-think its (policy). We forecast further upside for dollar/yen towards the 125 level in the latter half of the year.”
The Australian dollar was steady at $0.7510 ahead of a Reserve Bank of Australia (RBA) meeting on Tuesday.
“The RBA is expected to lean closer towards the hawkish market expectations, and hints otherwise could be construed as a AUD-negative, and see the pair retrace towards $0.7400,” said Terence Wu, strategist at Singapore’s OCBC Bank.
Sterling hovered at $1.3116.