French election, Russia sanctions keep pressure on euro By Reuters

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© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic//

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By Joice Alves

LONDON (Reuters) – The euro steadied on Wednesday after falling to its lowest level in a month against a strengthening dollar as the prospect of new Western sanctions on Russia and the upcoming French presidential election added to pressure on the European currency.

The euro had edged up 0.06% to $1.09130 versus the dollar by 1145 GMT, after briefly touching a nearly one-month low of $1.08735.

The United States and its allies prepared new sanctions on Moscow over civilian killings which President Volodymyr Zelenskiy described as “war crimes”, as heavy fighting and Russian airstrikes pounded the besieged port of Mariupol.

“A new round of sanctions against Russia are expected to be announced today by the U.S. and the EU, with any implications for energy exports likely to keep the euro under pressure,” ING FX strategists Francesco Pesole and Chris Turner told clients.

French eurosceptic, far-right candidate Marine Le Pen closing in on President Macron in the polls ahead of this month’s presidential election adds another threat to the euro.

“The euro remains under significant pressure from a steep increase in U.S. yields and anxiety ahead of Sunday’s first-round French presidential elections that may see it test 1.08,” said Shaun Osborne, chief FX strategist at Scotiabank.

The U.S. 2-year yield was at its highest since January 2019, the 5-year yield its highest since December 2018 and the benchmark 10-year yield its highest since March 2019. [US/]

The , which measures the greenback against six major currencies, eased to 99.500 after touching its highest since May 2020 at 99.759.

The index gained 0.5% on Tuesday after Fed Governor Lael Brainard, typically seen as a more dovish policymaker, said she expected a combination of interest rate increases and a rapid balance sheet runoff to bring U.S. monetary policy to a “more neutral position” later this year, with further tightening to follow as needed.

The Fed will release later in the day minutes of its March meeting that are expected to provide fresh details on its plans to reduce its bond holdings.

“What now matters is what the Fed does in May… and what signals it sends out regarding interest rates this year – several hikes of more than 25 basis points?” said Antje Praefcke, FX Analyst at Commerzbank (DE:).

She added that as markets have already priced in interest rate hikes, a confirmation of these expectations will likely have only a “marginally positive effect on the dollar”.

Sterling was flat versus the dollar at $1.30770, after touching a three-week low against the greenback. [GBP/]

was 1.3% softer at $44,899.

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