Peace Hopes in Ukraine Keep the Euro Afloat.

The dollar remained under pressure on Wednesday as prospects for a breakthrough in Russia-Ukraine peace negotiations buoyed the euro, while the under-pressed yen held steady even as the Bank of Japan stepped up efforts to keep bond rates low.

The euro, which has been pounded in recent weeks by concerns about the economic damage from Ukraine's war and the prospect of the conflict expanding west, hit a two-week high of $1.1137 overnight before falling to $1.1091 in Asia.

The euro also broke over its 200-day moving average against the pound, reaching a three-month high of 84.81 pence, while Russia's rouble rose to a one-month high of 83.50 to the dollar.

Russia has vowed to reduce military activities surrounding Kyiv, while Ukraine has suggested a neutral status as a show of progress at face-to-face talks in Istanbul.

US officials threw cold water on the prospect of an agreement by stating that the danger to Kyiv is not gone.

“At the very least, the two parties are conversing,” Commonwealth Bank of Australia analyst Joe Capurso said.

“Given Europe's closeness to the conflict and dependence on Russian energy, the uncertain positive news regarding the war will support the euro more than any other currency,” he added.

The risk-averse currencies, such as the Australian and New Zealand dollars, benefited from the atmosphere as well. In early trading, the Australian dollar was at $0.7512 and the New Zealand dollar was at $0.6946, both a little lower than recent highs. [AUD/]

The South Korean won, which has been pounded by the rise in oil prices since the conflict started a little over a month ago, had its best session in two years overnight.

Meanwhile, the yen is battling to establish a bottom of about 123 per dollar.

It is on course to have its worst month since November 2016, with a nearly 7% loss against the dollar, as Japan's central bank doubles down on its dovish approach while the rest of the globe becomes hawkish.

Already amid a four-day vow of limitless bond purchases to keep 10-year rates below its 0.25 percent cap, the BOJ stepped up efforts by extending purchases throughout the curve in both directions.

The 10-year Japanese government bond rate eventually declined to 0.225 percent, while the yen remained stable at 122.66 per dollar.

“Risks for USD/JPY remain skewed to the upside today.” “The 125.00 level will continue to be a solid level of topside resistance,” said Sophia Ng, an analyst at Singapore's MUFG Bank.