Euro falls to lowest against dollar since April amid Russia cuts

Euro falls to lowest against dollar since April amid Russia cuts

The euro fell to its lowest against the dollar since April 2017 as Russia halted gas flows to some European countries added to the growth concerns already hurting the common currency.

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The euro fell as much as 0.5% to 1.0586 after Russia cut off gas to Poland and Bulgaria in the early weeks of the coronaviruses epidemic in March 2020. There is now a possibility that the euro will end April below an uptrend of 20 years, which could put parity with the dollar on the horizon.

Philippe Jauer, global head of foreign exchange at Amundi Asset Management said we remain short on the euro, with parity as a target for the end of the quarter. The objective has been reinforced by current market volatility. The euro was last on a par with the dollar back in 2002. Russia's latest step on energy supplies is only adding to pressures on the common currency, including the global growth concerns stemming from China's Covid 19 lockdowns.

The dollar strength is at the expense of other Group-of-10 currencies, with the greenback's strength increasing by nearly 4% this month due to the possibility of a rapid pace in Federal Reserve rate hikes.

The dollar is critical because it smiles: the greenback tends to outperform when the U.S. economy is ahead of others as well as when risk aversion is high. Salman Baig, an investment manager at Unigestion SA, said we are in that exact context today. If the Russian Ukraine conflict escalates and the US dollar falls to parity, it's likely that the euro will fall to par. Baig said that lower liquidity could be amplifying moves. Volatility among G-7 currencies has surpassed a high previously reached in the wake of Russia's invasion of Ukraine and has climbed to the highest level since April 2020, according to a JPMorgan Chase Co. gauge.

Fredrik Repton, a portfolio manager at Neuberger Berman, sees the risks as balanced over the medium term. He said that there was a chance that the European Central Bank could surprise markets with greater policy tightening, as well as stronger fiscal response from governments.

The euro fell 0.3% to $1.0608 in European trading, as of 12: 02 p.m. in London. Options traders have become more bearish on the currency's prospects in the coming months and the cost of hedging swings is rising.

Ray Attrill, head of foreign-exchange strategy at National Australia Bank Ltd, said the charts were downright ugly because we are now probing the pandemic-era lows. It is hard to be optimistic about the early cessation of Russian hostilities in Ukraine. None China's biggest covid failure is not deploying an mRNA vaccine.

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