# Gas crisis sends euro back below parity against dollar
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-22
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Euro falls below parity against dollar on energy crisis
Meta Description: The euro dropped below $1 against a strong dollar amid fears of an energy crisis worsened by a halt in European gas supplies and Chinese yuan depreciation.
URL: https://financedigest.com/gas-crisis-sends-euro-back-below-parity-against-dollarhtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-08-22t082628z1lynxmpei7l07crtroptp4global-forex-1736815409142-compressed.jpg)

By Dhara Ranasinghe and Joice Alves

LONDON (Reuters) – The euro briefly fell back below parity against a robust dollar on Monday and was languishing at five-week lows, weighed down by concern that a three-day halt to European gas supplies later this month will exacerbate an energy crisis.

China’s yuan dropped to its lowest in nearly two years after the central bank cut key lending rates.

The dollar index, which measures the greenback against a basket of peers, surged to a mid-July high as Federal Reserve officials reiterated an aggressive monetary tightening stance [ahead of the Fed’s Jackson Hole symposium this week](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week").

The [euro and sterling bore the brunt of the selling pressure against the dollar](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") 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.

The single currency was last down 0.4% at $1.0001 after briefly [falling to its lowest level since](https://www.financedigest.com/biggest-uk-house-price-fall-recorded-since-financial-crisis.html "Biggest UK house price fall recorded since financial crisis") mid-July of $0.99895.

Jane Foley, head of FX strategy at Rabobank in London, said she would not be surprised to [see the euro](https://www.financedigest.com/euro-7-emissions-proposals-the-sequel-europes-carmakers-dont-want-to-see.html "Euro 7 emissions proposals, the sequel Europe’s carmakers don’t want to see") falling to $0.95.

European gas prices pushed higher again this morning, which draws attention to the recessionary risks facing the [euro zone](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") this winter and potentially beyond,” she said.

Chris Turner, global head of markets at ING, said: “The [euro’s fair value has been damaged by the energy](https://www.financedigest.com/europes-spend-on-energy-crisis-nears-800-billion-euros.html "Europe’s spend on energy crisis nears 800 billion euros") shock – meaning that euro/dollar is not especially cheap even at these levels.

Bundesbank President Joachim Nagel told German newspaper Rheinischen Post that the German economy, among the most exposed to disruptions in Russian gas supply, is “likely” to suffer a recession over the winter if the [energy crisis](https://www.financedigest.com/europes-energy-crisis-and-the-nuclear-path-out.html "Europe’s energy crisis and the nuclear path out") continues to deepen.

Sterling meanwhile fell to a new five-week low of $1.17875 as the energy crisis highlighted Britain’s [cost-of-living](https://www.financedigest.com/british-shoppers-defy-cost-of-living-crisis-at-christmas.html "British shoppers defy cost-of-living crisis at Christmas") crisis. \[GBP/\]

The U.S. dollar index, which measures the currency against six rivals, rose 0.25% to 108.42 after touching its [highest since](https://www.financedigest.com/russian-inflation-accelerates-to-7-61-m-m-in-march-highest-since-1999.html "Russian inflation accelerates to 7.61% m/m in March, highest since 1999") July 15.

It [gained 2.33% last week – its biggest weekly rally since April 2020 – amid a chorus of Fed policymakers stressing that more needs to be done to rein in decades-high inflation](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data").

The latest was Richmond Fed President Thomas Barkin on Friday, saying 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 towards faster, front-loaded rate increases.

Money markets currently indicate 54.5% odds for another supersized 75 basis-point [rate hike at the Fed’s](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") next meeting on Sept. 21

Economists in a Reuters poll lean toward a 50 basis-point increase, with [recession risks](https://www.financedigest.com/high-inflation-recession-risk-widen-ecb-dilemma.html "High inflation, recession risk widen ECB dilemma") on the rise.

Benchmark 10-year U.S. Treasury yields briefly rose above 3% on Monday 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 21.

As yields came off their highs, the [dollar edged down against the yen](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles") and was a touch lower on the day at 136.81. Earlier, the [dollar reached its strongest levels against the yen since](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") July 27.

The [dollar also rose as high as 6.8436 yuan](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro") in onshore trading for the first time since September 2020, after the People’s Bank of China cut the one and five-year loan prime rates, as widely expected.

That came after it [eased other key](https://www.financedigest.com/inflation-in-key-german-states-eases-for-second-month.html "Inflation in key German states eases for second month") borrowing benchmarks in a surprise move last week.

Against the offshore yuan, the [dollar hit](https://www.financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarks.html "European shares hit nine month high, dollar wobbles after Powell remarks") 6.8645, also the strongest since September 2020.

(Reporting by and Joice Alves; Editing by Ed Osmond and Jan Harvey)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---