A Euro banknote is displayed on U.S. Dollar banknotes in this illustration taken, February 14, 2022.
A Euro banknote is displayed on U.S. Dollar banknotes in this illustration taken, February 14, 2022. Reuters / DADO RUVIC

The euro rose on Wednesday, briefly nearing $1.10, supported ahead of this week's European Central Bank meeting by reports that European Union countries were discussing joint bond issuance to finance energy and defence spending.

After touching a 22-month low on Monday of $1.0806, the euro stood at $1.0968 at 1220 GMT, up 0.7% on the day, after a report citing unnamed officials said the EU was discussing joint bond issuance.

European currencies such as Poland's zloty and Hungary's forint rose sharply, rebounding from record lows against the euro, also supported by both central banks hiking rates on Tuesday.

The ECB meets on Thursday but amid the spectre of stagflation, money markets expect policymakers to delay rate hikes until late in the year. [IRPR]

"European currencies have been under heavy pressure for the past couple of weeks and some of these valuations have begun to look stretched," said Jane Foley, head of FX Strategy at Rabobank in London.

"News that the EU is considering issuing debt to finance energy and defence spending underpinned the euro and helped trigger the better tone in the euro and European currencies," she added.

Sterling rose 0.4% against the dollar to $1.3148, Poland's zloty jumped 1.8% against the greenback to 4.3808 and Hungary's forint surged 2.8% to 345.80.

Analysts said the euro is unlikely to make much headway while there is so much worry about the war in Ukraine spreading, while expectations for a Federal Reserve rate hike and safe haven demand suggested the U.S. dollar would be unlikely to give up too much ground.

Against a basket of currencies including the euro, the dollar fell 0.5% to 98.628, to sit just below a 22-month peak touched on Monday.

"While the uncertainty surrounding the military conflict but also energy prices remains high, the volatility on the FX market is unlikely to ease either, leaving the U.S. dollar with the advantage as a safe haven," said Antje Praefcke, FX Analyst at Commerzbank.

In the meantime, commodity prices are expected to drive FX trading with oil climbing again after the U.S. said it would ban Russian oil imports. [MKTS/GLOB]

The Norwegian crown rose 0.6% versus the dollar to 8.9235, the Brazilian real surged 0.6% to 5.0300 and the Canadian dollar was up 0.45% at 1.2833.

Cryptocurrencies also rose on speculation the White House may soften its combative approach to digital assets. Bitcoin was last up 10% at $42,330 and ether was up 7% at $2,760.