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Euro teeters near parity vs dollar, hits new 20-year low
The dollar index, a measure against six counterparts, with the euro most heavily weighted, was 0.2 percent higher at 108.43. It had earlier climbed to 108.47, its highest since October 2002.
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A 3D printed oil pump jack is placed on dollar banknotes in this illustration picture, April 14, 2020. (Reuters/Dado Ruvic)
T
he euro fell on Tuesday almost to parity with the dollar, a threshold not crossed for two decades, weighed down by the likelihood of recession triggered by an energy crunch and an ECB rate rise campaign that lags far behind that of the Fed.
The dollar index, a measure against six counterparts, with the euro most heavily weighted, was 0.2 percent higher at 108.43. It had earlier climbed to 108.47, its highest since October 2002.
Dollar bullishness was showcased across currency markets, with the euro falling as low as $1.00005 on Tuesday, the weakest since December 2002. It last changed hands down 0.3 percent at $1.00270.
The biggest pipeline carrying Russian gas to Germany, the Nord Stream 1, began annual maintenance on Monday, with flows expected to stop for 10 days. But governments and markets are worried Russia might extend the shutdown, exacerbating the energy crunch and tipping the economy into recession.
Analysts said the weak economy raises uncertainty over the European Central Bank's plan to raise interest rates, initially by 25 basis points in July, then by 50 bps in September.
"There doesn't seem to be a lot of support for euro at this point. It does not just relate to gas prices but to what seems to be a split within the ECB over how far they raise rates," said Sarah Hewin, senior economist at Standard Chartered,
"The expectation is for the (US Federal Reserve) to do 75 bps this month and its aim seems to be to get to neutral (rates) as soon as possible, while with ECB, it's more of a mixed message given the backdrop over gas."
