© Reuters Photo File: US Dollar and Euro Banknotes They appeared in the example taken on July 17, 2022. REUTERS/Dado Ruvic/Illustration
By Rae Wee and Kevin Buckland
SINGAPORE/TOKYO (Reuters) – The euro fell below 99 cents for the first time in nearly two decades and sterling was on the ropes on Monday as Russia cut gas supplies to Europe, raising concerns over energy prices and growth.
The euro fell to $0.9880 in Asian trade, its lowest level since 2002, while sterling hit a 2-1/2-year low of $1.14445, remaining close to the pandemic.
Meanwhile, the super-weighted euro, which measures the greenback against a basket of six currencies, hit a new two-decade high to 110.25.
Russia canceled Saturday’s deadline to resume flows through the Nord Stream pipeline, citing an oil spill in a turbine. It coincided with the Group of Seven finance ministers calling for a price hike in Russia’s oil prices.
The pound was also weighed down by the threat of rising energy prices. British Foreign Secretary Liz Truss said over the weekend that if she is to become Britain’s next prime minister, she will take immediate action to tackle rising energy bills and increase energy supplies.[nL8N30B0CP]
Osamu Takashima said: “We cannot have any confidence in the attitude of Europe, and this is negative for the euro. It depends a lot on Putin.” Citigroup (NYSE: ) Global Markets Chief FX Strategist.
The yen, at 140.38 per dollar, was under pressure at a 24-year low. The riskier Australian dollar slipped 0.41% to a seven-week low of $0.6780.
Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore, said: “The first order results look like geopolitical risk is higher and global demand shocks are likely to dominate.”
“A negative demand shock in a very unsavory geopolitical environment is likely to trigger and reflect demand for the safe haven of the US dollar … European currencies are likely to be worse off and on the back foot.”
Rate hikes are on the cards this week. Markets see a near 80% chance of a 75 basis point (bp) hike in Europe and a 70% chance of a 50 bp hike in Australia.
“One would have expected a hawkish ECB to deliver some kind of tailwind for the euro. But what you’ll get instead is policy trade-offs and a dilemma,” Varatan said.
In the United States, bids for a 75 bp increase this month pulled back slightly after Friday’s consolidated jobs report, which contained few hints of a looser labor market.
Fed funds futures indicate a 58% chance of a 75bp hike.
Elsewhere in Asia, the
China’s southern technology hub, Shenzhen, said it would adopt standardized anti-virus restrictions from Monday, while Chengdu announced an extension of lockdown restrictions as the country grapples with a new outbreak.