Reuters: Currency trading in a spin after Polish explosion

Trading in the US dollar and the euro was volatile on Tuesday, with both currencies trading below their session highs as investors tried to interpret reports that stray Russian missiles may have hit NATO member Poland, killing two people, Report informs via Reuters.

The euro had lost ground sharply against the safe-haven dollar while equities pared gains after the Poland reports fueled fears that the nine-month war between Russia and Ukraine could escalate.

Firefighters said two people were killed in an explosion in Przewodow, a village in eastern Poland near the border with Ukraine, while a NATO official said the alliance was investigating reports that the blast was from Russian missiles.

But Russia's defense ministry said "no strikes on targets near the Ukrainian-Polish state border were made by Russian means of destruction".

Meanwhile, the Pentagon said it could not confirm the reports and the White House said it was working with the Polish government to gather information.

"The market is particularly sensitive now that Ukraine has taken back more territory that Russia had captured after the war began," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

The euro was last up 0.38% at $1.0364 after falling as much as 0.44% following the reports from Poland. The dollar index , which measures the greenback against a basket of major currencies was last down 0.23% after rising as much as 0.42% after the reports out of Poland.

News of the explosions had overshadowed earlier gains in the euro after US economic data suggested easing US inflation.