Image: Reuters Berita 24 English - Amid worries that an oil crisis could push Europe into recession and as the U.S. Federal Reserve continu...
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| Image: Reuters |
Berita 24 English - Amid worries that an oil crisis could push Europe into recession and as the U.S. Federal Reserve continues to aggressively tighten monetary policy to combat inflation, the euro remained close to a 20-year low near parity to the dollar on Tuesday.
The euro hit its lowest level since December 2002 on Monday, dropping as low as $1.0006.
The dollar index, which compares the value of the dollar to those of six major peers with the euro having the biggest weighting, showed little change at 108.17 after rising to its highest level since October 2002 overnight.
The Nord Stream 1 pipeline, the largest single pipeline supplying Russian gas to Germany, started its annual repair on Monday, with flows anticipated to cease for 10 days.
Governments, markets, and businesses are concerned that Russia may prolong the standstill due to the conflict in Ukraine, escalating the continent's energy supply crisis and possibly accelerating a recession.
The dollar index has been moving upward as a result of the euro's weakness, as well as concerns about global economic growth and the tough zero-COVID rules China has implemented to control new breakouts.
However, the belief that the Fed will raise rates quicker and further than rivals is probably the main reason for the dollar's increase.
Bets on the European Central Bank's tightening campaign, which is expected to begin this year, have been temperated by Europe's difficult circumstances, while the Bank of Japan has consistently reiterated its commitment to exceptional stimulus.
After climbing to a new 24-year high of 137.75 yen on Monday, the dollar eased down 0.14 percent to 137.22 yen.
According to Carol Kong, a currency analyst at Commonwealth Bank of Australia, "the dollar really rose across the board, showing a continuation of the pattern that we've seen recently, namely, global recession fears."
At the same time, she continued, Fed policymakers "will simply be laser focused on high inflation, so they'll just keep on hiking rates."
"I believe there is a chance that the euro and dollar could converge this week,"
At its meeting on July 26–27, the Fed is anticipated to raise rates by 75 basis points for a second time. The Fed Funds benchmark rate is expected to increase from its current level of 1.58 percent to 3.50 percent by March, according to futures dealers.
Numerous economic indicators from the United States are expected to be released this week, and they should show how much the rate hikes so far have reduced pricing pressures.
This week's key economic release is the consumer price index report, which is coming on Wednesday. According to economists surveyed by Reuters, the index will show a June annual rate of 8.8 percent.
In other news, the Australian dollar fell 0.22 percent to $0.6722, moving closer to the two-year low of $0.6716 hit on Monday due to a decline in commodities prices and further COVID limitations from China.
The New Zealand dollar dropped 0.15 percent to $0.6105, closing down on its own two-year low set on Monday at $0.60975. This happened despite the fact that the central bank is planning to raise the main rate by half a point at its meeting on Wednesday.
Additionally, the Bank of Canada plans to tighten further during its own policy meeting on Wednesday. The Canadian dollar increased 0.17 percent on Tuesday to C$1.30275, but it has largely been consolidating below its last peak since October 2020 at C$1.30845.
