TOKYO: The safe-haven U.S. dollar firmed in volatile trading on Wednesday as markets took stock of geopolitical risks following news of a Russian-made rocket striking NATO-member Poland.
U.S. President Joe Biden said early information suggested the blast in Poland may not have been caused by a missile fired from Russia, even as the United States and its NATO allies investigated the blast, which killed two.
Russia denied it was responsible for the explosion but the report sparked turbulent trading overnight as fears of the war in Ukraine spilling over to its neighbors rattled investors.
Biden was speaking after global leaders held an emergency meeting on Wednesday following the deadly explosions that Ukraine and Polish authorities said were caused by Russian-made missiles.
"The market is trying to size up the risk and what that really means," said Moh Siong Sim, currency strategist at Bank of Singapore.
"Is that something that is going to lead to further tension or perhaps this is something that will deescalate over the next few days."
"Right now, it's a bit of a tussle in the market as to how to price this risk," he added.
The turbulent trading saw major currencies swing between gains and losses, with the U.S. dollar index, which measures the currency against six peers and weights the euro most heavily, rising as much as 0.31% to 106.76 before last trading 0.13% higher at 106.57.
The euro was up 0.11% at $1.0361, having slipped 0.18% earlier in Asian trade. The currency saw similar moves overnight.
Sterling was last trading at $1.1873, up 0.13% after reversing its losses from earlier in the day.
The Japanese yen weakened 0.38% versus the greenback to 139.82 per dollar.
"The currency market is stabilising, toying with the notion that this was a stray missile or an intercepted missile and doesn't necessarily imply an escalation in the war, with NATO needing to get involved," said Rodrigo Catril, a senior currency strategist at National Australia Bank.
Risk-sensitive Antipodean currencies slipped, with Australian dollar down 0.09% versus the greenback at $0.675, while the kiwi fell 0.23% to $0.614.
(Reporting by Kevin Buckland and Ankur Banerjee in Singapore; Editing by Edmund Klamann and Bradley Perrett)