Euro Falls Below Parity With the Dollar

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On Monday, investors fled riskier assets in anticipation that interest rate hikes in the United States and Europe, aimed at curbing inflation,

would weaken the global economy, causing the U.S. dollar to rise against all other currencies. This sent the euro back below parity.

The dollar rose 0.8% against a basket of currencies, taking it to a level not seen in over five weeks and not far from its 20-year high of 109.29, which was reached in mid-July.

The Federal Reserve is holding a symposium this week in Jackson Hole, Wyoming. The greenback has gotten a boost because several Fed officials said they are committed to aggressively tightening money.

On Friday, Richmond Fed President Thomas Barkin added his voice to the chorus of central bankers calling for more rapid, up-front increases in interest rates.

The market "got a reality check from last week's Fed speakers that an imminent dovish pivot is off the cards," said Michael Brown, head of market intelligence at Caxton in London.

When growth worries, especially in Europe, persist, "it's the perfect cocktail of risk-aversion and a hawkish Fed for the greenback to bound higher," as Brown put it.

Russian officials said late on Friday that they would cut off gas to Europe through the Nord Stream 1 pipeline for three days at the end of the month, sending the euro tumbling.

As the energy crisis has been a drag on the common currency in recent months, investors are concerned that the halt could make the situation worse.

Joachim Nagel, president of the Bundesbank, told a German newspaper that even though a recession in Germany is becoming more likely, the European Central Bank must keep raising rates

Due to the decline, the euro dropped below $1 for the first time since July 14th. At last check, one euro cost $0.99345, a 1.1% loss.

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