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Euro falls below parity with the dollar

U.S. Dollar and Euro banknotes have emerged in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

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  • Euro under great pressure as Russia to prevent gas supplies
  • Yuan dips to nearly 2-year low as PBOC eases policy again

NY, Aug 22 (Reuters) – The U.S. dollar rose over the board on Monday, briefly driving the euro back below parity, as investors shied from riskier assets amid growing fears that interest-rate hikes in the usa and Europe, targeted at curbing inflation, would weaken the global economy.

Against a basket of currencies, the dollar was 0.5% higher at 108.71 , not definately not the two-decade most of 109.29 touched in mid-July.

The greenback has found support in recent sessions as several Federal Reserve officials reiterated an aggressive monetary tightening stance prior to the Fed’s Jackson Hole, Wyoming, symposium this week.

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The most recent of the officials, Richmond Fed President Thomas Barkin, on Friday said the “urge” among central bankers was toward faster, front-loaded rate increases. read more

“It’s risk being removed the table following the market got possible check from last week’s Fed speakers an imminent dovish pivot is off the cards,” said Michael Brown, head of market intelligence at Caxton in London.

“With investors now clearly expecting a comparatively hawkish message from Fed Chair (Jerome) Powell at Jackson Hole on Friday, it is a perfect cocktail of risk-aversion and a hawkish Fed for the greenback to bound higher, particularly when growth worries, especially in Europe, continue steadily to mount,” Brown said.

The euro fell following Russia’s announcement late on Friday of a three-day halt to European gas supplies via the Nord Stream 1 pipeline by the end of the month. Investors worry that the halt could exacerbate a power crisis which has weighed on the normal currency lately. read more

The European Central Bank must keep raising rates even though a recession in Germany is increasingly likely, as inflation will remain uncomfortably high through 2023, Bundesbank President Joachim Nagel told a German newspaper.

The weakness briefly drove the euro below $1 for the very first time since July 14. The euro was last down 0.7% at $0.99715 .

“0.9950 appears to be the pivotal level, as that is the prior low, if that provides way then we’re able to see significant further losses, especially with the ECB’s window to tighten policy rapidly slamming shut,” Brown said.

China’s yuan dropped to its lowest in nearly 2 yrs following the country’s central bank cut its benchmark lending rate and lowered the mortgage reference by way of a bigger margin on Monday, increasing last week’s easing measures, as Beijing boosts efforts to regenerate an economy hobbled by way of a property crisis and a resurgence of COVID-19 cases. read more

Contrary to the offshore yuan , the dollar was 0.55% higher at 6.8621.

Sterling fell to its lowest since mid-July contrary to the dollar on Monday as surging energy costs and a summer of strikes highlighted the united kingdom cost of living crisis and intensified fears for further economic slowdown. read more

The pound was last down 0.43% at $1.1781 , inside a whisker of taking right out the near 2-1/2 year low of just one 1.1761 touched in mid-July.

In cryptocurrencies, bitcoin was about 0.92% lower at $21,316, weighed down by broad risk aversion in markets.

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Reporting by Saqib Iqbal Ahmed; editing by Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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