© Reuters. FILE PHOTO: US Dollar and Euro banknotes seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration
By Rae Wee and Kevin Buckland
SINGAPORE/TOKYO (Reuters) – The euro fell below 99 cents for the first time in nearly two decades, while the pound was trending lower on Monday as Russia stopped supplying gas to its main pipeline to Europe. raising concerns about energy prices and growth.
The euro fell to $0.9880 in Asian trade, its lowest level since 2002, while the pound hit a 2-1/2 year low at $1.144445 and remained unchanged. close to its pandemic bottom.
Meanwhile, the greenback, which measures the greenback against a basket of six currencies with the largest weighting of the euro, hit a new two-decade high, rising to as high as 110.25.
Russia canceled a Saturday deadline for flows down the Nord Stream pipeline to resume, citing an oil leak in a turbine. It coincided with the announcement of the Russian oil price cap by the Group of 7 finance ministers.
The pound was also weighed down by concerns about rising energy costs. British Foreign Secretary Liz Truss said over the weekend she would take immediate action to tackle rising energy bills and increase energy supplies if she becomes Britain’s next prime minister. , as expected.[nL8N30B0CP]
“We cannot trust the outlook in Europe, and this is negative for the euro. It depends a lot on Putin,” said Osamu Takashima. Citigroup (NYSE: Global Markets FX Strategist.
The yen, at 140.38 per dollar, was under pressure near a 24-year low. The risk-sensitive Australian dollar is down 0.41% and near a seven-week low at $0.6780.
Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore, said: “The first effect seems to be increased geopolitical risks and adverse global demand shocks that may have a negative impact. will be the dominant effects”.
“Adverse demand shocks in an unfavorable geopolitical environment are likely to trigger, and reflect, safe-haven demand for the US dollar… European currencies perhaps. will be hit the hardest.”
This week, exceptional rate hikes will appear. Markets have priced in an almost 80% chance of a 75 basis point (bp) increase in Europe and an almost 70% chance of a 50 bp increase in Australia.
“One might predict that a hawkish ECB would bring some wind to the euro. But what you might get instead is policy trade-offs and dilemmas.” , Varathan said.
In the United States, the 75bp price gain this month has cooled somewhat after a mixed jobs report on Friday, which contained few hints of an easing labor market.
Fed funds futures imply about a 58% chance of a 75 bp gain.
Elsewhere in Asia,
China’s southern technology hub Shenzhen said it would impose tiered anti-virus restrictions starting Monday, while Chengdu announced an expansion of containment measures, as the country grapples with new outbreaks.