# Dollar higher on risk aversion; euro revisits parity
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-22
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: USD Rises as Euro Falls: Market Update
Meta Description: Stay updated on the latest trends in forex trading as the US dollar continues to strengthen against other major currencies due to inflation concerns. Follow
URL: https://financedigest.com/dollar-higher-on-risk-aversion-euro-revisits-parityhtml

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By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The U.S. dollar rose across the board on Monday, briefly driving the euro back below parity, as [investors shied away from riskier assets amid growing fears that interest-rate hikes](https://www.financedigest.com/uk-stocks-slip-as-rate-hike-worries-grip-investors.html "UK stocks slip as rate hike worries grip investors") in the United States and Europe, aimed at curbing inflation, would weaken the global economy.

Against a basket of currencies, the [dollar was 0.5% higher](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") at 108.71, not far from the two-decade high of 109.29 touched in mid-July.

The greenback has found support in [recent sessions as several Federal Reserve officials reiterated an aggressive monetary tightening](https://www.financedigest.com/german-yields-steady-spreads-tighten-after-recent-repricing.html "German yields steady, spreads tighten after recent repricing") stance ahead of the Fed’s Jackson Hole, Wyoming, symposium this week.

The latest of these officials, Richmond Fed President Thomas Barkin, on Friday said the “urge” among [central bankers](https://www.financedigest.com/inflation-fighting-central-bankers-air-climate-role-doubts.html "Inflation fighting central bankers air climate role doubts") was toward faster, front-loaded rate increases.

It’s risk being taken off the table after the [market got a reality check from last week’s Fed](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") speakers that an imminent dovish 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, it’s a perfect cocktail of risk-aversion and a hawkish Fed for the greenback to bound higher](https://www.financedigest.com/asia-shares-creep-higher-wary-on-fed-and-boj-outlooks.html "Asia shares creep higher, wary on Fed and BOJ outlooks"), especially when growth worries, especially in Europe, continue to mount,” Brown said.

The [euro fell following Russia’s announcement late on Friday of a three-day halt to European](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") gas supplies via the Nord Stream 1 pipeline at the end of this month. Investors worry that the halt could exacerbate an [energy crisis](https://www.financedigest.com/europes-spend-on-energy-crisis-nears-800-billion-euros.html "Europe’s spend on energy crisis nears 800 billion euros") that has weighed on the common currency in recent months.

The European [Central Bank](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus") must keep raising rates even if a recession in Germany is increasingly likely, as inflation will stay 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](https://www.financedigest.com/euro-zone-economy-sentiment-rises-in-dec-first-time-since-start-of-ukraine-war.html "Euro zone economy sentiment rises in Dec, first time since start of Ukraine war") July 14. The euro was last down 0.7% at $0.99715.

0.9950 seems to be the pivotal level, as that’s the prior low, if that gives way then we could [see significant](https://www.financedigest.com/thomson-reuters-report-reveals-risk-compliance-staff-expect-to-see-significant-benefits-from-artificial-intelligence-ai-and-distributed-ledger-technologies.html "Thomson Reuters Report Reveals Risk & Compliance Staff Expect to See Significant Benefits from Artificial Intelligence (AI) and Distributed Ledger Technologies") further losses, especially with the ECB’s window to tighten policy rapidly slamming shut,” Brown said.

China’s yuan dropped to its lowest in nearly two years after the country’s central bank cut its benchmark lending rate and lowered the mortgage reference by a bigger margin on Monday, adding to last week’s easing measures, as Beijing [boosts efforts to revive an economy hobbled by a property](https://www.financedigest.com/how-a-garden-can-boost-your-property-value.html "How a garden can boost your property value") crisis and a resurgence of COVID-19 cases.

Against the offshore yuan, the [dollar was 0.55% higher](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") at 6.8621.

Sterling fell to its lowest [since mid-July against the dollar](https://www.financedigest.com/dollar-retreats-headed-for-biggest-weekly-loss-since-mid-january-bitcoin-down.html "Dollar retreats, headed for biggest weekly loss since mid-January; bitcoin down") on Monday as surging energy costs and a summer of strikes highlighted the UK cost of living crisis and intensified fears for further economic slowdown.

The pound was last down 0.43% at $1.1781, within a whisker of taking out the near 2-1/2 [year low](https://www.financedigest.com/analysis-euros-20-year-low-leaves-ecb-facing-costly-choices.html "Analysis-Euro’s 20-year low leaves ECB facing costly choices") of 1.1761 touched in mid-July.

In cryptocurrencies, bitcoin was about 0.92% lower at $21,316, [weighed down by broad risk](https://www.financedigest.com/asia-shares-weigh-china-risks-yen-hits-6-month-high.html "Asia shares weigh China risks, yen hits 6-month high") aversion in markets.

(Reporting by Saqib Iqbal Ahmed; editing by Jonathan Oatis)


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