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NEW YORK: The dollar rose to a two-week peak on Tuesday as tensions between Russia and the West over Ukraine drew investors to safe-haven currencies and traders awaited for details from this week’s Federal Reserve policy meeting.

Russia said it was watching with great concern after the United States put 8,500 troops on alert to deploy to Europe in the event of an escalation in the Ukraine crisis.

The rouble pared gains to weaken toward a more than 14-month low versus the dollar after a sell-off on Monday. The rouble was last 0.18% lower versus the greenback at 79.19 per dollar.

Heightened tensions over Ukraine have exposed the euro and Europe, especially regarding energy, but the dollar’s strength has more to do with Fed policy tightening, said Alvise Marino, director of FX strategy at Credit Suisse.

“The market was pricing in one hike by the Fed in 2022. Now we’re pricing four. That is ultimately the major driver of the dollar strength we’ve seen the past three months,” he said.

“This accelerated a bit on the back of weakness in the broader equity markets and risk appetites that you’ve seen in particular since last Wednesday,” Marino said.

But with other central banks poised to raise rates too, dollar volatility has abated as the Cboe volatility index for the S&P 500 stocks has doubled so far in 2022, he said.

The dollar index rose 0.287%, with the euro down 0.42% to $1.1275. The Japanese yen strengthened 0.02% versus the greenback at 113.91 per dollar.

The Fed could firm up plans to raise interest rates and shrink its holdings of US Treasury bonds and mortgage-backed securities, which have swollen its balance sheet past $8 trillion. The Fed’s two-day meeting ends Wednesday.

Analyst views of the meeting are mixed, with Deutsche Bank flagging a potentially hawkish surprise over the coming months, with as many as six or seven increases this year.

But ING analysts say that if the Fed’s balance sheet reduction does the heavy lifting of policy normalization, that could scale back forecasts for the number of rate hikes.

Money markets are pricing an 85% chance of a Fed rate rise of 25 basis points in March and three more to 1.0% by the end of the year.

The Swiss Franc was down 0.14% against the euro at 1.0368 , just off the 1.0298 it hit recently for its strongest since 2015.

CFTC data shows that gross Swiss franc long contracts numbered only 925, down from 4,571 the previous week.

Bitcoin, which has almost halved in value since touching a record high of $69,000 in November, lost about 0.31% to trade around $36,704. Ether, the world’s second-largest cryptocurrency, was down 0.16% at $2,439.44.

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