On Tuesday, the dollar stayed solid on safe-haven flows, while the euro hovered at a two-decade low as investors braced for a difficult winter in Europe as it grappled with energy supplies and broader economic growth issues.
The euro fell to its lowest level since late 2002 overnight, at $0.9926, and was last little higher at $0.9939. Russia will block natural gas deliveries to Europe via the Nord Stream pipeline for three days at the end of the month, the latest reminder of the continent’s vulnerable energy supply situation.
Heatwaves in Europe have already put a strain on energy supply, and concerns are rising that any disruption over the winter months may be disastrous for commercial activities.
“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,” said Ray Attrill, head of FX strategy at National Australia Bank (NAB).
“Is it really just going to be a three day maintenance or is this just another example of weaponization of gas supply into Europe?”
The pound was also pulled to a fresh 2.5-year low overnight, and was trading near that level in early Asia trade at $1.1758. The Japanese yen remained stable at 137.30 per dollar after falling to a one-month low of 137.70.
The Australian and New Zealand currencies were reasonably stable, which NAB’s Attrill ascribed to the market’s focus on Europe’s dismal outlook.
The eurozone and the United Kingdom will release flash manufacturing PMI readings later in the day, which will provide additional clarity on the respective economies’ growth paths.
Investors are also anticipating the minutes of the European Central Bank’s (ECB) most recent policy meeting, which are expected to sound hawkish even as the continent’s economy slows.
The Australian dollar yesterday rose 0.15% to $0.6689, while the New Zealand dollar rose 0.18% to $0.6183. In other Asian markets, the dollar touched 6.8711 against the offshore yuan, close to the almost two-year high of 6.8752 set on Monday.
The US dollar index stayed solid at 108.9 against a basket of currencies, with the euro being the most heavily weighted, aiming to break through a two-decade high of 109.29 set in July.
Another reason investors have sought refuge in the dollar is the increased danger of a hawkish message from the Federal Reserve’s Jackson Hole symposium, which many officials warned about last week.
“Bonds sold off, headed by the front end,” according to ANZ analysts. “This might be in anticipation of Chair [Jerome] Powell’s speech on Friday, which is expected to reaffirm hawkish message.”
The yield on the benchmark 10-year Treasury note has climbed roughly 4 basis points this week to 3.0201%. The yield on the two-year Treasury note rose by 5 basis points to 3.3140% as investors remained on the lookout for inflation and the Fed.
Article source — financestanderd.com
Date - 23/Aug/2022
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