September 30, 2022

Dollar rises due to risk aversion;  The euro is back in par

Dollar rises due to risk aversion; The euro is back in par

  • The euro is under pressure with Russia to stop gas supplies
  • The yuan fell to its lowest level in nearly two years as the People’s Bank of China (PBOC) eased policy again

NEW YORK (Reuters) – The U.S. dollar rose broadly on Monday, pushing the euro back briefly below parity, as investors moved away from riskier assets amid growing concerns that interest rate hikes in the United States and Europe, aimed at curbing Inflation will dampen 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 it touched in mid-July.

The dollar found support in recent sessions as several Federal Reserve officials reiterated their strong monetary tightening stance ahead of this week’s Jackson Hole, Wyoming seminar.

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The latest of those officials, Richmond Fed President Thomas Barkin, said on Friday that the “desire” among central bankers was toward faster rate increases. Read more

“It’s a risk to be taken off the table after the market got a sobering check from Fed speakers last week that a cautious axis is imminent out of reach,” said Michael Brown, head of market intelligence at Caxton in London.

“With investors now clearly anticipating a relatively hawkish message from Federal Reserve Chair (Jerome) Powell at Jackson Hole on Friday, this is the perfect combination of risk aversion and the Fed’s hawkish trend for the dollar to rise, especially when growth concerns, particularly in Europe, are,” he said. Brown”.

The euro fell after Russia announced late on Friday a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month. Investors are concerned that the pause could exacerbate the energy crisis that has affected the single currency in recent months. Read more

European Central Bank President Joachim Nagel told a German newspaper that the ECB should keep raising interest rates even if a recession is increasingly likely in Germany, where inflation will remain uncomfortably high until 2023.

The weakness briefly pushed 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 pivot level, as this is the previous low, and if that fades we could see more big losses, especially with the ECB window to tighten policy quickly closing,” Brown said.

The Chinese yuan fell to its lowest level in nearly two years after the country’s central bank cut the benchmark lending rate and cut the mortgage reference by a larger margin on Monday, adding to the easing measures taken last week, as Beijing boosts its efforts to revive a weakened economy. Property crisis and resurgence of COVID-19 cases. Read more

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

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

The pound was last down 0.43% to $1.1781, in a longitudinal range from getting rid of the 2-1/2-year low of 1.1761 it touched in mid-July.

In the cryptocurrency, Bitcoin is down around 0.92% at $21,316, affected by widespread risk aversion in the markets.

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(Narrated by Saqib Iqbal Ahmad). Editing by Jonathan Otis

Our criteria: Thomson Reuters Trust Principles.