Dollar higher on risk aversion; the euro revisits parity

  • Euro under pressure as Russia halts gas supplies
  • Yuan plunges to near 2-year low as PBOC eases policy again

NEW YORK, Aug 22 (Reuters) – The U.S. dollar appreciated broadly on Monday, briefly pushing the euro back below parity, as investors shunned riskier assets amid growing concerns that rising interest rates in the United States and Europe only aimed to curb inflation, would weaken the global economy.

Against a basket of currencies, the dollar was up 0.5% at 108.71, not far from a two-decade high of 109.29 hit in mid-July.

The greenback has found support in recent sessions as several Federal Reserve officials reiterated an aggressive monetary tightening stance ahead of the Fed symposium in Jackson Hole, Wyoming, this week.

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The latest of those officials, Richmond Fed Chairman Thomas Barkin, said on Friday that central bankers’ “urge” was to raise rates faster and on a priority basis. Read more

“There is a risk of being taken off the table after the market was confronted with the reality from Fed speakers last week that an imminent accommodative pivot is not on the cards,” said Michael Brown, chief executive. market intelligence at Caxton in London.

“With investors now clearly expecting a relatively hawkish message from Fed Chairman (Jerome) Powell in Jackson Hole on Friday, it’s a perfect cocktail of risk aversion and a hawkish Fed for the greenback to rise. on the upside, especially when growth worries, especially in Europe, keep going up,” Brown said.

The euro fell following Russia’s announcement on Friday night of a three-day shutdown of European gas supplies through the Nord Stream 1 pipeline at the end of this month. Investors fear the shutdown could exacerbate an energy crisis that has plagued the common currency in recent months. Read more

The European Central Bank must keep raising rates even though a recession in Germany is increasingly likely, as inflation will remain uncomfortably high through 2023, Bundesbank President Joachim Nagel has told a German newspaper. .

The weakness briefly drove the euro below $1 for the first time since July 14. The euro was last down 0.7% at $0.99715.

“0.9950 appears to be the pivotal level as this is the previous low, if this breaks we could see further significant losses, especially with the ECB closing the window quickly to tighten policy,” he said. Brown said.

The Chinese yuan fell to its lowest level in nearly two years after the country’s central bank cut its benchmark lending rate and lowered the mortgage benchmark by a larger margin on Monday, adding to measures to easing in the past week, as Beijing steps up its efforts to revive an economy hampered by a real estate crisis and a surge in COVID-19 cases. Read more

Against the offshore yuan, the dollar was up 0.55% at 6.8621.

The pound fell to its lowest level since mid-July against the dollar on Monday as soaring energy costs and a summer of strikes highlighted the UK’s cost of living crisis and intensified fears of another economic downturn. Read more

The pound was last down 0.43% at $1.1781, a hair’s breadth from the nearly 2.5-year low of 1.1761 hit in mid-July.

In cryptocurrencies, bitcoin was around 0.92% lower at $21,316, weighed down by broad risk aversion in the markets.

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Reporting by Saqib Iqbal Ahmed; edited by Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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