Intraday 1 Euro Falls to $0.9998
Market Sees Possibility of Decline to 90 Cents
[Asia Economy Reporter Kim Hyunjung] The value of 1 Euro has fallen below 1 dollar for the first time in 20 years as the US dollar continues to strengthen. The Euro is depreciating amid Europe's overall economic difficulties caused by the energy crisis, recession concerns, and the resurgence of COVID-19.
According to Bloomberg on the 13th (local time), the Euro-to-dollar exchange rate dropped intraday to $0.9998, marking the lowest level in about 20 years since December 2002. Just a year ago, the Euro was trading above $1.20.
However, following the war in Ukraine, Europe has faced an energy supply crisis, recession fears, and a recent resurgence of COVID-19, which have continued to weigh on the Euro's value.
Although the US is also facing similar challenges, risk-averse assets are flowing relatively more into the US, sustaining the strong dollar phenomenon. The Dollar Index, which measures the dollar's value against six major currencies, reached 108.56 on the day, the highest since October 2002, before slightly declining.
The Euro's weakness is expected to further strain the European economy, which is already experiencing severe inflation. Last month, the European Consumer Price Index (CPI) rose 8.6% year-on-year.
The report explained, "Europe is suffering the most from the (Ukraine) war that caused the energy crisis and recession," adding, "US Treasury yields are higher than those of the 19 Eurozone countries, attracting investors to the dollar." It further forecasted, "The longer the war continues and its impact worsens, the more the Euro will continue to decline."
Market participants expect the value of 1 Euro to fall to as low as 90 cents. According to the US Depository Trust & Clearing Corporation (DTCC), since early July, options traders have increasingly bet on the Euro at around 95 cents, with a short-term bottom expected near 98 cents. Strategists at Deutsche Bank estimate that if the Euro falls to between 95 and 97 cents, the dollar's value against the Euro will reach its highest level since the end of the Bretton Woods system in 1971, when currency values were linked to the dollar.
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