© Reuters. FILE PHOTO: A woman holds Euro banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration
By Kevin Buckland and Rae Wee
TOKYO (Reuters) – The US dollar hit a fresh two-decade high against major currencies on Tuesday, supported by safe-haven bids and expectations of a sharp Federal Reserve rate hike. stronger, while the euro was pinned near a 20-year low near greenback parity.
One measure against six counterparts, with the euro having the largest weight, was 0.25% higher at 108.43. Before that, it climbed to 108.47, the highest since October 2002.
“Strong demand for the USD, coupled with a surprise increase in last Friday’s payrolls release, is likely to contribute to the dollar’s latest rally in strength,” said analysts at Maybank. dollars”.
That dollar’s rise has been evident across most money markets, with the euro falling to as low as $1,0006 on Tuesday, its lowest level since December 2002. Last. it changed hands down 0.29% at $1.0013.
The pound also fell 0.25% to $1.18645, having previously sunk to a two-year low at $1.186.
The late EUR depreciation appears to be mainly due to the market re-evaluating the potential for a more significant growth downturn in the euro area, amplified by energy disasters, longer-than-expected war and doubts about the ECB’s defragmentation,” Maybank analysts said.
The largest single pipeline carrying Russian gas to Germany, the Nord Stream 1 pipeline, began its annual maintenance on Monday, with flows expected to cease for 10 days.
Governments, markets and companies are concerned Russia could extend the shutdown because of the war in Ukraine, exacerbate the continent’s energy supply downturn and potentially accelerate Depression.
Carol Kong, currency strategist at Commonwealth Bank of Australia (OTC:), said: “All eyes will be on whether Russian gas flows will return through the Nord Stream 1 pipeline after the end of the pipeline. maintenance end next week or not”.
“But in the meantime, I think concerns about a possible shutdown of Russian gas lines will continue to keep the euro/dollar heavy and that means the dollar will continue to strengthen. ”
Euro weakness was a big part of pushing the dollar index higher, with the US safe-haven currency also supported by growth worries elsewhere, notably China. The country implements strict zero COVID policies to prevent new outbreaks.
Arguably the biggest factor in the dollar’s rally, however, is the view that the Fed will raise interest rates faster and further than its peers.
The Fed is expected to raise interest rates by 75 basis points for the second time in a row at its July 26-27 meeting. Fed futures funds are pricing its benchmark interest rate hike to 3.50%. in March, from the current 1.58%.
Investors are keen to keep an eye on US consumer price data due to be released on Wednesday, with economists polled by Reuters expecting the index to print an 8.8 ratio. % yearly for June.
Elsewhere, the dollar fell 0.09% to 137.28 yen, following Monday’s jump to a 24-year high of 137.75.
The Philippine peso fell 0.59% to its lowest level since September 2005 at 56.38 a dollar. And the Korean won fell to its lowest level since April 2009 at 1,315.2 per dollar
The Australian dollar was up 0.22% to $0.6728, and had previously matched a two-year low of $0.6716 hit on Monday amid falling commodity prices and economic measures. China’s new COVID containment measure.
