The euro fell below the dollar again on fears of an energy crisis in Europe

FILE PHOTO. Illustration image of a person holding US dollar bills in front of Euro bills. May 30, 2022. REUTERS/Dado Ruvic

The euro briefly dipped back below parity against a robust dollar on Monday and languished at five-week lows.overwhelmed by concern that a three-day interruption in European gas supply later this month will exacerbate a energy crisis.

China’s yuan fell to its lowest level in almost two years after the central bank cut key interest rates.

The dollar index, which measures the dollar against a basket of peers, reached fresh five-week highs as Federal Reserve officials reiterated an aggressive monetary tightening stance ahead of the Fed’s Jackson Hole symposium this week.

It was the euro that bore the brunt of the selling pressure against the dollar. after what Russia will announce a three-day suspension of European gas supplies on Friday night. via the Nord Stream 1 pipeline later this month.

The coin fell to low of $0.99945, its lowest level since mid-Julyand was down 0.4% for the last time on the day.

“The fair value of the euro has been damaged by the energy shock, which means that the euro/dollar is not particularly cheap even at these levels.”, said Chris Turner, global head of markets at ING.

The president of federal bankJoachim Nagel told the German newspaper Rhine Mail What is it “Likely” that the German economy, one of the most exposed to interruptions in the supply of Russian gas, will suffer a recession during the winter if the energy crisis continues to deepen.

FILE PHOTO.  Pipelines at the landing facilities of the gas pipeline "north stream 1" in Lubmin, Germany.  July 21, 2022. REUTERS/Annegret Hilse
FILE PHOTO. Pipelines at the landing facility of the “Nord Stream 1” gas pipeline in Lubmin, Germany. July 21, 2022. REUTERS/Annegret Hilse

The us dollar indexwhich measures the currency against six rivals, including the euro, rose to 108.47, its highest level since July 15.

It gained 2.33% last weekits best weekly rally since April 2020, amid a chorus of Fed policymakers stressing that more must be done to rein in decades-high inflation.

The last was the president of the Richmond Fed, thomas barkinon Friday, saying that the “push” among central bankers was toward faster and earlier rate hikes.

Money markets currently indicate a 46.5% chance of another huge 75 basis point rate hike at the next Fed meeting on September 21.

Economists in a survey of Reuters they are leaning towards a 50 basis point rise with recession risks rising.

Benchmark 10-year US Treasury yields briefly rose above 3% on Monday for the first time since July 21.

As yields fell from their peaksthe dollar fell against the yen and dipped a bit on the day at 136.81. Earlier, the dollar hit its strongest levels against the yen since July 27.

In the meantime, Sterling fell to a fresh five-week low of $1.17875.

The dollar also rose as high as 6.8420 yuan in domestic trading for the first time since September 2020, after the People’s Bank of China lowered prime rates on one- and five-year loans, as widely expected. That came after it relaxed other key lending benchmarks in a surprise move last week.

Against the offshore yuan, the dollar hit 6.8621, also the strongest since September 2020.

The commodity-linked Australian dollar gained 0.2% at $0.6885, recovering after falling to $0.68595 on Friday for the first time since July 19, as Dalian iron ore rallied. more than 2% and copper also rose. The kiwi advanced 0.3% to $0.6190.

(With information from Reuters)

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