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As the euro approaches parity, stocks once again decline

Image: Reuters Berita 24 English -  The possibility of additional central bank tightening and concerns about the state of economies througho...

Image: Reuters

Berita 24 English -  The possibility of additional central bank tightening and concerns about the state of economies throughout the world worried investors, sending the euro to within a hair's breadth of parity with the dollar on Tuesday. Stock markets also declined.

The dollar has recently roared to two-decade highs against a variety of currencies, enhancing its position as the safe-haven currency of choice for investors concerned about the economic prospects.

Due to the persistent impact of rising natural gas costs on the local economy, the conflict in neighbouring Ukraine, and the European Central Bank's lag in hiking interest rates, the euro has been especially susceptible.

The euro has fallen 0.3 percent to $1.0004, its lowest level in more than 20 years, by 7:25 GMT.

The yen was not far from its worst in more than two decades, while sterling hit another two-year low and the dollar index increased by 0.3 percent to 108.48.

The march towards parity, according to Mizuho analysts, is taking place since "the recession in the euro zone is priced in," and the overall environment does not appear to be improving risk sentiment.

In either case, they said, "there appears to be little stopping the euro/dollar from breaking parity in the relatively near future."

Investors will be looking for hints on the outcome of the Federal Reserve's upcoming policy meeting before the pre-meeting blackout period, so the focus this week will be on macro data, notably U.S. consumer inflation on Wednesday, and remarks from Federal Reserve officials.

A strong inflation reading would put even more pressure on the Fed to accelerate the rate at which interest rates are raised.

The Euro STOXX fell 0.7 percent on equities markets, while the DAX in Germany fell 0.8 percent and the FTSE 100 in Britain fell 0.44 percent.

Additionally, U.S. futures markets suggested a weaker opening.

While Japan's Nikkei lost 1.8 percent, MSCI's largest index of Asia-Pacific shares outside of Japan dropped by 1.3 percent to its lowest level in two years.

The fact that a rising number of Chinese cities, including the business hub Shanghai, are imposing new COVID-19 limits as of this week to prevent the spread of illnesses following the discovery of a highly transmissible Omicron subvariant is another issue that tops investors' lists of concerns.

The biggest pipeline bringing Russian natural gas to Germany started yearly maintenance, and flows are anticipated to stop for 10 days. This raises serious concerns about the rising cost of energy in Europe.

Investors are worried that the shutdown may last longer due to the conflict in Ukraine, severely limiting the supply of gas to Europe and sending the already fragile euro zone economy into recession.

The benchmark 10-year Treasury note yield was 2.92 percent, having fallen back below 3 percent overnight as investors purchased safe-haven Treasury securities in the midst of a sell-off on Wall Street.

Despite worries about a limited supply, growth concerns were also hurting oil prices.

U.S. West Texas Intermediate crude traded at $101.53 per barrel, down 2.44 percent, while Brent crude futures down 2.2 percent to $104.73.

Spot gold prices were unchanged at $1,735 per ounce.

Bitcoin's final price, at $19,670, was down 1.4 percent from its previous day's high.

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