Dollar rebounds

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TOKYO- The safe-haven US dollar hovered near a two-week high against its major peers on Tuesday amid escalating worries about both a faster pace of Federal Reserve policy tightening and potential military conflict in Ukraine.

The Australian dollar rose briefly after strong consumer price numbers boosted the case for a Reserve Bank interest rate increase this year.

The Fed begins a two-day policy meeting later in the global day, and investors will be anxious for any hints on the timing and pace of rate hikes, as well as about how fast the central bank will shrink its more-than $8 trillion holdings of Treasuries and mortgage debt.
Money markets are priced for a first rate hike in March, with three more quarter-point increases by year-end.

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The dollar index, which measures the greenback against six major peers, edged up slightly to 95.920, after climbing as high as 96.135 overnight for the first time since Jan. 10.

“The case for the Fed potentially following up a March rate rise before the June meeting – even as early as April – is a very compelling one, and there is a risk that the market will still have to reprice,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.

“The geopolitical risk has just added a new layer of safe haven support.”

Markets until recently had mostly shrugged off the massing of Russian troops on Ukraine’s borders, but tensions have ratcheted up lately. NATO said it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as an escalation of tensions.

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