Risk Appetite Improves as Tensions Ebb

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The Japanese Yen steadied against its main adversary, the U.S. Dollar, despite heavy losses incurred on Tuesday as investors’ risk appetite improved following the easing of geopolitical tensions in Ukraine. Vladimir Putin, the President of Russia, insisted that they reserved the right to intervene in order to protect terrorized compatriots but that at the present a show of force was unnecessary. Equity markets rebounded strongly following Putin’s press conference, with Wall Street benchmark, the S&P500, striking a record high at the close. With risk returning, the common currency Euro surged 0.8% against the safe haven Yen.

As reported at 12:59 p.m. (JST) in Tokyo, the USD/JPY traded at 102.23 Yen, a gain of 0.8% and the largest single day’s increase in more than six weeks. The EUR/JPY’s 0.8% rise on Tuesday put the pair at at a high of 140.39 Yen. The EUR/USD edged lower to $1.3732, moving away from last Friday’s 2-month peak at $1.3825.

Are Dovish Moves Ahead for ECB?

Though appetite for higher risk currencies has improved, the Euro is still feeling some pressure as investors await a monetary policy decision on Thursday. FX players are wary that Mario Draghi, the ECB head, could take a more dovish position given that inflation continues to remain under the 2% ECB target and because deflation is continuing to pose a threat to the economic recovery of the Eurozone.

Barbara Zigah is a freelance journalist living in Ghana, who specializes in Forex-related content; her online work has appeared in the IB Times, NASDAQ, Benzinga, and Seeking Alpha.