US dollar and euro banknotes are seen in this photo taken on July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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SING`ORE, Aug 23 (Reuters) – The dollar held firm on Tuesday on safe-haven flows, while the euro smoldered around a two-decade low as Europe grapples with energy supplies and broader economic growth concerns.
The euro hit its lowest level since late 2002 overnight at $0.9926 and was last little higher at $0.9941.
Russia will halt natural gas supplies to Europe via the Nord Stream 1 pipeline for three days later this month, the latest reminder of the continent’s precarious state of energy supplies. Continue reading
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Heat waves across the continent have already strained energy supplies and there are growing concerns that any disruption during the winter months could have a devastating impact on business operations.
“Of course, given the current sentiment, there are concerns as to whether it will be three days or three years,” said Ray Attrill, head of FX strategy at National Australia Bank (NAB).
“Will it really be just a three-day maintenance or is this just another example of arming gas supplies to Europe?”
The pound was also pulled to a fresh 2.5-year low overnight, limping near that level in Asian trading at $1.17715. The Japanese yen stabilized at 137.265 per dollar after hitting a monthly low of 137.705.
Conversely, the Australian and New Zealand dollars were relatively stable, which NAB’s Attrill attributed to market attention being drawn to the weak outlook for Europe.
Investors’ main focus for Tuesday will be the flash manufacturing PMIs for the euro-zone and the UK later in the day, which will provide further clarity on the growth trajectory of the respective economies.
Investors are also awaiting the minutes of the European Central Bank’s (ECB) latest monetary policy meeting on Thursday, which is likely to sound hawkish even as the continent faces a slowdown in growth.
The Aussie is up 0.28% to $0.6898, while the Kiwi is also up 0.28% to $0.6190.
Elsewhere in Asia, the dollar was trading at 6.8652 against the offshore yuan, not far from a nearly two-year high of 6.8752 hit on Monday.
Against a basket of currencies in which the euro is the most heavily weighted, the US dollar index remained firm at 108.9, attempting to break a two-decade high of 109.29 set in July.
Another reason investors have sought refuge in dollars is the growing risk of an aggressive message from the Federal Reserve’s Jackson Hole Symposium flagged by several officials last week.
“Bonds sold off, led by the front end,” analysts at ANZ said. “That’s possibly in anticipation that Chairman (Jerome) Powell’s speech on Friday is likely to reiterate the hawkish message.”
Yields on the benchmark 10-year Treasury note are up about 4 basis points on the week, to last stand at 3.0165%. Yields on the 2-year Treasury note rose about 5 basis points to 3.3102% as investors continued to bet on inflation and Fed watch mode.
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Edited by Shri Navaratnam and Jacqueline Wong
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