The euro yesterday dropped to a fresh two-decade trough as Europe was buffeted by concerns about energy supply and economic growth, while the US dollar held firm against major peers, supported by safe-haven flows.
The euro hit US$0.9909, its lowest since late 2002, and was last down 0.29 percent at US$0.9914.
European shares yesterday extended their losses as investors waited for European Purchasing Managers’ Index data due later in the day to gauge the health of businesses in a hyperinflationary environment, while fretting about soaring energy prices and a weak economic outlook.
Photo: AFP
Russia is to halt natural gas supplies to Europe via the Nord Stream 1 pipeline for three days at the end of this month, the latest reminder of the precarious state of the continent’s energy supply.
Heat waves in the continent have already put a strain on energy supply and worries are growing that any disruption during the winter months could be devastating for business activity.
“Given the current mood, there’s obviously concerns as to whether that’s going to be three days or whether it’s going to be three years,” National Australia Bank head of FX strategy Ray Attrill said of the pipeline shutdown. “Is it really just going to be a three-day maintenance or is this just another example of weaponization of gas supply into Europe?”
Benchmark gas prices in the EU surged 13 percent overnight to a record peak, having doubled in just a month to be 14 times higher than the average of the past decade.
The British pound was similarly dragged to a new two-and-a-half-year low of US$1.1729, while the yen steadied at ￥137.270 per US dollar after touching a one-month low of ￥137.705 earlier in the day.
Elsewhere in Asia, the yuan fell to an almost two-year low of 6.8552 per US dollar. The risk-sensitive Australian dollar fell to a one-month low and last traded 0.29 percent lower at US$0.6859. The New Zealand dollar slid 0.15 percent to US$0.6163.
Against a basket of currencies, in which the euro is the most heavily weighted, the US dollar index stood firm at 109.12, attempting to breach a two-decade high of 109.29 hit last month.
Another reason investors have sought shelter in US dollars is the growing risk of a hawkish message from the US Federal Reserve’s Jackson Hole symposium, flagged by several officials last week.
“Bonds sold off, led by the front end,” Australia and New Zealand Banking Group Ltd analysts said. “That’s possibly in anticipation that Chair [Jerome] Powell’s speech on Friday is likely to reiterate hawkish messaging.”
Yields on the benchmark 10-year US Treasury note have risen about 4 basis points for the week and last stood at 3.0091 percent.
Yields on the two-year US Treasury note were up similarly up around 4 basis points at 3.3018 percent as investors remained on inflation and Fed-watch mode.
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