Forex News

The dollar goes up, and the euro is almost even.

Tokyo (Reuters) – On Tuesday, the U.S. dollar hit a new 20-year high against its major rivals. This was due to demand for safety and expectations of more aggressive rate hikes from the Federal Reserve. At the same time, the euro was held close to a 20-year low against the greenback.

The dollar index, which compares the dollar to six other currencies with the euro receiving the most weight, rose 0.25 percent to 108.43.It had been at 108.47, which was its highest point since October 2002.

Analysts at Maybank said that the recent rise in the value of the dollar was likely caused by demand for USD in safe havens and a better-than-expected report on payrolls last Friday.

The dollar’s strength was seen in most of the currency markets. On Tuesday, the euro fell as low as $1.0006, which was the lowest level since December 2002. It was last traded at $1.0013, a 0.29 percent decrease.

Sterling fell 0.25 percent to $1.18645.Earlier, it had hit a new two-year low of $1.186, which was its lowest point in the last two years.

Analysts at Maybank said that the recent drop in the value of the euro seems to have been caused by the market reevaluating the likelihood of a more significant slowdown in growth in the euro area. This was made worse by problems with energy, the war lasting longer than expected, and doubts about the ECB’s anti-fragmentation tool.

The Nord Stream 1 pipeline, which is the largest single pipeline that brings Russian gas to Germany, started its annual maintenance on Monday. Gas flow is expected to stop for 10 days.

Governments, markets, and businesses are worried that Russia might keep the shutdown going because of the war in Ukraine. This would make the energy shortage on the continent even worse and could speed up a recession.

“Everyone will be watching to see if Russian gas flows through the Nord Stream 1 pipeline after maintenance is done next week,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC: CMWAY).

But in the meantime, I think worries about a possible stoppage of Russian gas flows will keep the euro/dollar low, which means the dollar will keep getting stronger.

The euro’s weakness has been a big part of the dollar index’s rise. Worries about growth in other places, like China’s strict zero-COVID policies to stop new outbreaks, have also helped support the dollar as a safe haven.

The belief that the Fed will raise rates faster and further than other central banks is probably the biggest reason why the dollar is going up.

At its meeting on July 26 and 27, the Fed is likely to raise rates for the second time in a row by 75 basis points. Fed funds futures predict that the benchmark rate will go up from 1.58 percent to 3.50 percent by March.

Investors are paying close attention to the U.S. consumer price data that will be released on Wednesday. Economists polled by Reuters expect the index to show an annual rate of 8.8 percent for June.

In other news, the dollar fell 0.09 percent to 137.28 yen after reaching a new 24-year high of 137.75 on Monday.

The Philippine peso fell by as much as 0.59 percent, which is the most since September 2005. At 1,315.2 won per dollar, the South Korean won fell to its lowest level since April 2009.

The Australian dollar fell by 0.22 percent to $0.6728. It had already reached a two-year low of $0.6716 on Monday, when commodity prices fell and China put more restrictions on COVID.

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