Yahoo Finance Euro dips below $1.10 for first time since 2020
The euro has slipped below $1.10 for the first time in almost two years as the war in Ukraine continues to stoke inflation fears while investors flock towards the safe-haven dollar.
The common currency fell as low as $1.0964, down 0.9%, against the dollar (EURUSD=X), its weakest level since May 2020, after reports of Europe’s largest nuclear power plant being attacked by Russian shelling.
A fire broke out at the Zaporizhzhia nuclear plant in Ukraine as Russian forces mounted an attack on the city of Enerhodar, 550km south-east of Kyiv.
The blaze was later put out and Ukrainian authorities said the reactors were safe. The International Atomic Energy Agency (IAEA) said it had not affected “essential” equipment.
The euro is more than 2% down this week, the worst fall since the outbreak of COVID-19 in March 2020. It approached a key support level that dates back to the euro’s inception in 1999.
It also hit a fresh seven-year low against the Swiss franc, another safe-haven in times of economic trouble. The euro sank 0.4% against the pound (EURGBP=X) to 82.56 pence, hitting its lowest level since July 2016.
The pound remains supported as the Bank of England (BoE) is expected to hike interest rates for a third consecutive time when it meets later this month.
“Europe has become the focal point of the stagflationary and geopolitical angst in the markets and the euro could remain the pressure valve for these investor fears,” said Valentin Marinov, head of G10 currency research at Credit Agricole.
Read more: European stock markets in the red after Russia's alleged attack on Ukraine nuclear plant
Meanwhile, the dollar has jumped to its highest level in almost two years, since July 2020.
The euro peaked against the dollar at $1.23 early last year, but has struggled as the US Federal Reserve prepares for a tightening cycle, which is expected to widen the rates gap between it and the European Central Bank (ECB).
Markets do not expect interest rate hikes at the ECB's next meeting, however, the Fed is almost certain to raise interest rates at its meeting this month for the first time since the coronavirus pandemic.
“My sense now is the euro trend should continue lower,” said Neil Jones, head of foreign-exchange sales to financial institutions at Mizuho, adding that a close below the $1.10 level on Friday would be “likely to send off alarm bells for further euro selling”.
