Forex Today: Dollar holds its ground as risk aversion takes over

Here is what you need to know on Tuesday, February 22:

Safe-haven flows started to dominate the financial markets late Monday after Kremin announced that Russian President Vladimir Putin would sign a decree to recognise the breakaway regions of Eastern Ukraine, Donetsk and Luhansk, as independent nations. Early Tuesday, risk-sensitive assets are struggling to find demand and the greenback stays resilient against its major rivals. IFO Survey from Germany will be looked upon for fresh impetus in the European session. In the second half of the day, Conference Board's Consumer Confidence Index and Markit PMIs will be featured in the US economic docket.

White House Principal Deputy National Security Adviser Jonathan Finer said that they were fully expecting Russia to take military action and added that the signs on the ground were not suggesting that Russia was looking for a diplomatic solution. Furthermore, a senior White House official said in a statement that the US will announce new sanctions against Russia on Tuesday in response to Moscow's "decisions and actions" on Monday. On the other hand, Russia's parliament will reportedly review friendship treaties with the territories on Tuesday.

Meanwhile, Russia's foreign ministry said early Tuesday that Russia was always open to talks and diplomacy but these comments don't seem to be helping the market mood improve. Reflecting the risk-averse market environment, the S&P Futures are down more than 2%, the 10-year US Treasury bond yield is losing 2% at 1.86% and the US Dollar Index is posting small daily gains above 96.00.

EUR/USD touched a fresh weekly low of 1.1288 in the late Asian session on Tuesday but managed to rebound to 1.1300 heading into the European session.

Gold regained its traction on the back of safe-haven flows and climbed to its highest level since June at $1,914. At the time of press, XAU/USD was clinging to modest daily gains near $1,910.

GBP/USD edged lower amid renewed dollar strength and declined below 1.3600 on Tuesday. Bank of England (BoE) Deputy Governor Dave Ramsden is scheduled to deliver a speech at 1045 GMT.

Crude oil prices surged higher on Monday and the barrel of West Texas Intermediate gained more than 2% to close the day near $94.00. Although WTI staged a correction early Tuesday, it continues to trade above $93.00.

USD/JPY fell to its weakest level in nearly three weeks at 114.53 during the Asian trading hours before paring its losses and turning flat on the day near 114.80 in the European morning.

Bitcoin stays on the back foot near $37,000 after suffering heavy losses on Monday. Ethereum is falling for the seventh straight day and trading at its lowest level since late January at $2,500.