Euro Hits Five Year Low Against the USD Putting Parity in Spotlight

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The Euro Monday traded with the USD at 1.0521 being its lowest level since March 2017. The Euro had lost about 2% in a week of trade against the USD and was down 7.48% YTD

There is a speculation that the Euro may come at parity with the American currency as the fears of a Eurozone recession mounts following the signalled turning off of Gas to Bulgaria and Poland by Russia

“The dollar’s role here is critical, especially given its smile: the greenback tends to outperform when the U.S. economy is outpacing others as well as when risk aversion is high. We are in that exact context today,” said Salman Baig, an investment manager at Unigestion SA. “Any further escalation of the Russian/Ukraine conflict or even more hawkish Fed tone would certainly risk the euro sliding to parity.”

According to Bloomberg, the prospect of a rapid pace in Federal Reserve rate hikes is also fueling dollar strength, with a gauge of the greenback hitting a five-year high. The euro was last on a par with the dollar back in 2002.

[READ ALSO] Russia Begins to Withdraw its Gas Supply

In a similar trend, the Russian ruble has made considerable gains against the Euro, with the EUR/RUB trading at 74.69, down by 1.21% on the day and 12.52% YTD.

Bloomberg said the euro continued to fall sharply in New York trading, down 0.9% to $1.0546 as of 9:42 a.m. in New York. Options traders have become more bearish on the currency’s prospects in coming months and the cost of hedging swings is rising.

“We are now probing the pandemic-era lows, and the charts just look downright ugly,” said Ray Attrill, head of foreign-exchange strategy at National Australia Bank Ltd. “It’s hard to be optimistic on any early cessation of Russian hostilities in Ukraine.”

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