The euro was higher on Thursday on hopes for progress in talks between Russia and Ukraine, while the Federal Reserve decision to raise rates and tackle inflation aggressively failed to affect the market as the bar for a hawkish surprise was high.

New Fed projections showed policymakers ready to shift their inflation fight into high gear; most of them see the federal funds rate rising to a range between 1.75% and 2% by the end of 2022.

“Considering the very hawkish FOMC meeting, yesterday’s market reaction was not particularly impressive, indicating that investors were already pricing in a rather aggressive hiking cycle,” Unicredit analysts said.

The dollar index, which measures its strength against six trading currencies, fell 0.3%.

Euro jumps as Russian Foreign Minister sees hope for compromise with Ukraine

“The US forward curve had already incorporated a heavy degree of tightening before the FOMC meeting, which may slow the intensity of further USD appreciation,” they added.

Amid unrelenting fighting between Russia and Ukraine, both sides have spoken of progress at peace talks. Moscow said negotiations resumed on Thursday by videolink for a fourth straight day, discussing military, political and humanitarian issues.

The euro gained 0.3% to a one-week high of $1.167.

“What is important for the foreign exchange market is whether the likelihood of an energy crisis decreases, which would be clearly inflationary and relevant to the exchange rate for many reasons,” Commerzbank analysts said.

“A very fragile peace would perhaps only help moderately in this respect,” they added.

Japan’s yen fell 0.1% to 118.67, within striking distance of its lowest since February 2016, hit on Wednesday at 119.12 as the Bank of Japan (BoJ) ruled out tightening monetary policy.

Japan is unlikely to see inflation hitting a target of 2%, even accounting for rising energy costs, BoJ Governor Haruhiko Kuroda said, making a case for keeping monetary policy ultra-easy at its policy meeting due on Friday.

The pound is strengthening against the euro and the dollar while investors await the outcome of the Bank of England policy meeting, with money markets pricing in an about 70% chance of a 50 bps rate hike.

The Australian dollar rose 0.5% to 0.7328 versus the greenback after employment sped past expectations in February as activity recovered surprisingly quickly from an Omicron outbreak.