Euro slumps to two-decade low against US dollar as recession fears bite

The euro slumped to a two-decade low on Tuesday as the latest surge in European gas prices added to worries about a recession

euro
Photo: Unsplash/Ibrahim Boran
Reuters LONDON
2 min read Last Updated : Jul 05 2022 | 3:31 PM IST

The euro slumped to a two-decade low on Tuesday as the latest surge in European gas prices added to worries about a recession, while there was no stopping the dollar as U.S. Treasury yields staged a rebound.

Swathes of currencies were under pressure. The euro's 0.8% early drop took it to its weakest since the end of 2002, Japan's yen was near 24-year lows again, while Norway's crown slumped 1% as its gas workers went on strike.

MUFG's head of global markets research, Derek Halpenny, said the risks of Europe backsliding into a recession looked to be growing after another big 17% jump in natural gas prices in both Europe and in Britain.

Concerns about how the European Central Bank will react were also gnawing at sentiment after German Bundesbank chief Joachim Nagel had hit out at the ECB's plans to try and shield highly indebted countries from sharp rises in borrowing rates.

"It will continue to be very difficult for EUR to rally in any meaningful way with the energy picture worsening and risks to economic growth increasing notably," said MUFG's Halpenny.

Even the Australian dollar failed to gain traction despite the country's first back-to-back 50 basis point interest rate hike in recent memory overnight, which also cemented the fastest run up in rates there since 1994.

The Aussie ticked 0.09% lower to $0.6820, after trading as high as $0.6895 earlier in the day.

"We have had so many central banks hiking in these big increments that you are now getting talk of reverse currency wars," said Rabobank FX strategist Jane Foley, referring to where central banks need to hike rates just to stop their currencies from falling.

"It could get concerning" for a number of currencies she added, especially if the U.S. Federal Reserve pushes ahead with large rate hikes in the coming months as expected.

The dollar's strength, meanwhile, sent the yen back down toward a 24-year low. It was last at 135.79 per dollar.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

Topics :EuroUS Dollar

First Published: Jul 05 2022 | 3:15 PM IST

Next Story