The euro fell below $1.06 for the first time in five years against a broadly strong US dollar today amid growing concerns about energy security and slowing growth in China and Europe.
The euro fell to a five-year low of $1.05890 after Russia’s Gazprom said it would cut gas supplies to Poland and Bulgaria.
The single currency has fallen more than 4% so far in April and is headed for its worst monthly loss in more than seven years, as uncertainty surrounding the war in Ukraine and China’s covid lockdown measures prompted traders to abandon the euro in favor of the safe. haven dollar.
“Turbulent markets mean a supported dollar,” said Francesco Pesole, currency strategist at ING.
The data also showed that consumer confidence in France, the euro zone’s second-largest economy, fell more than expected in April.
The US dollar index, which measures its performance against a basket of six major currencies, rose 0.3% to 102.6, after hitting its highest level since the early days of the pandemic.
Also supporting the dollar index, traders are betting that rates are rising faster in the US than in any other major economy.
“As risk assets continue to show instability and markets have now made a conviction call on the Fed’s aggressive tightening cycle, the dollar has likely found a new bottom,” Pesole said.
Elsewhere, the Chinese yuan took a breather, after falling to a 13-month low on Monday, stabilizing at 6.5547 per dollar.
The data also showed that Chinese industrial profit growth accelerated in March. (Full story)
Sterling, which has fallen more than 2% against the dollar this week as weak retail sales data prompted a rethink of Britain’s rate outlook, hit a fresh 21-month low of $1.2543.
Commodity currencies have also been selling off for the safety of the US dollar of late, taking the New Zealand dollar to its lowest since January at $0.6551.
The Norwegian krone fell against the dollar to its lowest level of 9.2200 since November 2020.
The Australian dollar briefly touched its lowest level since February but picked up some steam after Australian consumer prices rose at their fastest annual pace in two decades, sparking speculation that interest rates could rise from lows. historical as early as next week. The Australian dollar was up 0.3% at $0.7149.
The stronger dollar also dented an attempted rebound in the yen, which had seen some support from security flows and positioning on the risk of a policy change. The yen last traded down 0.7% at 127.93 to the dollar.
The Bank of Japan meets today and tomorrow and markets see some risk of adjustment to forecasts or even policy changes to try to stem the recent weakness in the currency.