Dollar Rises While Euro Comes Close To Parity

On Monday, the US dollar climbed across the board, pushing the euro below parity once more, with risk appetite took a hit with investors worried about interest rate hikes in Europe and the United States.

While the hikes would be aimed at taming inflation, they would result in a weakening global economy.

The greenback rises

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There was a more than 0.8% rise in the US dollar against a basket of major currencies to 109.02, which is a high of more than five weeks.

This was not far from 109.29, which is a peak of two decades that it reached in mid-July. Recent sessions have seen the greenback find some support.

This was after a number of officials of the Federal Reserve stated that they believed further aggressive tightening was required, just ahead of the symposium in Jackson Hole, Wyoming this week.

Thomas Barkin, the President of the Richmond Fed, said on Friday that central bankers were in favor of front-loaded and faster interest rate increases.

Market analysts said that risk had been taken off the table after the Fed speakers gave a reality check to the market last week that they had no intention of turning dovish anytime soon.

Now investors are expecting a hawkish stance from Fed chairman Jerome Powell on Friday at Jackson Hole, which creates a risk-averse environment that is bound to take the greenback higher.

This is particularly because growth concerns continue to increase in Europe.

Euro’s problems

Late on Friday, Russia announced that the Nord Stream 1 pipeline would be shut for three days due to maintenance, which means Europe will not get any gas supplies at the end of the month.

This saw the euro drop, as investors became concerned that the energy crisis in Europe could be exacerbated, which has already weighed down the single currency significantly.

The weakness briefly saw the euro fall below the $1 mark for the first time after July 14th. It was the last trading at $0.99345, which is a fall of 1.1%.

Other currencies

There was also a decline in the Chinese yuan, as the currency fell to its lowest in almost two years after the central bank in China reduced its benchmark lending rate as well as mortgage reference on Monday.

This was an addition to the easing measures in the previous week, as Beijing tries to revive a slowing economy, which is dealing with a rise in COVID-19 cases and a property crisis.

The dollar climbed 0.54% against the offshore yuan to 6.869. Sterling also dropped to its lowest against the US dollar since mid-July, with the cost of living crisis in the UK intensifying.

The British pound last recorded decline of 0.64% against the dollar at $1.17565, which was close to a two and a half year low of $1.17435 that it had reached in mid-July.

In the crypto market, bitcoin also recorded losses of 2.52%, as it came down to $20,972 because of the risk-off sentiment seen across most markets.

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