On Wednesday, the US dollar was able to recoup some of the losses it incurred because of data and moved back towards recent peaks.
As for the euro, the currency remained under pressure because of rising recession worries stoked by a potential energy supply crisis in the continent.
Data and supply concerns
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On Tuesday, disappointing manufacturing and services surveys in the US were released and new home sales also plunged, which gave some breathing room to the US dollar.
This was after a run that had seen the green reaches its strongest level in two decades against the euro. However, the growing concerns in Europe are also worth noting.
These mostly revolve around its exposure to Russian gas supplies, which have reduced significantly while the continent needs to prepare for the upcoming winter season.
On Wednesday morning, there was a rise in front-month Dutch gas, which is regarded as a benchmark for Europe, and this was because of the halt in supplies at the end of the month.
Investors were on edge after Russian Gazprom announced that it would halt supplies for three days through the Nord Stream 1 pipeline to Europe because of unscheduled maintenance.
On Tuesday, the euro had briefly climbed back up to the level of $1, but it was unable to retain the level for long and was once more under pressure in early European trading to reach $0.9950.
This was barely above the low of $0.99005 that it had reached on Tuesday. Market analysts said that pushing the euro back above parity was something very difficult for the market.
This was primarily because of the gas supply concerns that are plaguing Europe, along with the possibility of a hawkish Federal Reserve on Friday.
The symposium of Kansas City Federal Reserve is scheduled to begin on Thursday at Jackson Hole and all eyes are turned toward the speech from Fed chairman Jerome Powell, which is scheduled for Friday.
There was a 0.1% rise in the US dollar index, which measures its performance against a basket of six of its major peers, which saw it reach 108.66.
This brought it within touching distance of the two-decade peak it had reached in July at 109.29. Analysts said that market participants were fully focused on the symposium on Friday.
Since there is the expectation that Powell will be hawkish, it is highly likely that the dollar would resume its rally once more and there is a chance that it would end up breaching its July high.
Overnight, Neel Kashkari, the President of the Minneapolis Fed, said that there was a need for more aggressive interest rate hikes in order to tame inflation.
Meanwhile, there was also pressure on cyclical currencies, such as New Zealand and the Australian dollar, because of worries about a global slowdown in growth.
The Aussie dropped 0.15% to reach $0.6920, while the Kiwi fell 0.23% to $0.6199. The British pound was also close to lows of two and a half years at $1.1718.
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