Dollar higher on risk aversion; euro revisit parity

  • Euro under pressure as Russia is to stop gas supplies
  • Yuan falls to near 2-year low as PBOC eases policy again

NEW YORK, Aug 22 (Reuters) – The U.S. dollar rose across the board on Monday, briefly pushing the euro back below parity, as investors shied away from riskier assets on growing fears that interest rate hikes in the U.S. and Europe had goal. by curbing inflation, it would weaken the world economy.

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

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

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The latest of those officials, Richmond Fed President Thomas Barkin, said Friday that the “push” among central bankers was toward faster, front-loaded rate hikes. read more

“There is a risk of being taken off the table after the market got a reality check from last week’s Fed speakers that an imminent dove pivot is off the cards,” said Michael Brown, head of market intelligence at Caxton in London.

“With investors now clearly expecting a relatively hawkish message from Fed Chair (Jerome) Powell at Jackson Hole on Friday, there is a perfect cocktail of risk aversion and a hawkish Fed for the dollar to go higher, especially when growth worries, especially in Europe , keep rising,” Brown said.

The euro fell after Russia’s announcement late on Friday of a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month. Investors worry that the shutdown could worsen an energy crisis that has weighed on the single currency in recent months. read more

The European Central Bank must continue to raise interest rates even as a recession in Germany is increasingly likely, as inflation will remain uncomfortably high through 2023, Bundesbank President Joachim Nagel 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 key level as it is the previous low, if it gives way we could see significant further losses, especially with the ECB’s policy tightening window closing fast,” Brown said.

China’s yuan fell to its lowest in nearly two years after the country’s central bank cut its benchmark lending rate and lowered its mortgage benchmark by a wide margin on Monday, adding to last week’s easing, as Beijing steps up efforts to revive an economy hampered by a real estate crisis and a resurgence of COVID-19 cases. read more

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

Sterling fell to its lowest since mid-July against the dollar on Monday, as rising energy costs and a summer of strikes highlighted Britain’s cost-of-living crisis and raised fears of further economic slowdown. read more

The pound was last down 0.43% at $1.1781, within a touch of taking out the nearly 2-1/2-year low of $1.1761 touched in mid-July.

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

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Reporting by Saqib Iqbal Ahmed; editing by Jonathan Oatis

Our standards: Thomson Reuters Trust Principles.

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