The euro sank below $0.99 to a new 20-year low on Monday after Russia’s halt to gas supplies down its main pipeline to Europe heightened fears about a deepening energy crisis across the region, reports Financial Post.
The euro has been increasingly correlated with natural gas prices in recent months, with the former falling when prices of the energy source rise.
Euro plunges to 20-year low
Europe is scrambling to wean itself off Russian supplies and build up reserves before the cold winter months, but investors reckon the hit to its economy will be huge.
Russia scrapped a Saturday deadline for flows down the Nord Stream pipeline to resume, citing an oil leak in a turbine. It coincided with the Group of Seven finance ministers announcing a price cap on Russian oil.
The euro EUR=EBS slid to as low as $0.9876 in early European trade, the lowest level since 2002, before recovering to $0.9939, still 0.2% lower on the session.
“Gas flows have been curtailed even more than expected and we have already seen evidence of demand destruction weighing on activity,” said Michael Cahill, a strategist at Goldman Sachs. “We now expect the Euro to fall further below parity ($0.97) and remain around that level for the next six months,” he added.
Other currencies vulnerable to spiralling energy prices also fell. In early trading, sterling dropped half a percent to a new 2-1/2 year low of $1.1444 GBP=D3, with traders also eyeing the announcement of a new British prime minister due around 1130 GMT.
The dollar index, which measures the greenback against a basket of currencies, briefly hit 110.27 =USD, its strongest since June 2002 as the euro tumbled. It later fell back and was last down 0.2% at 109.74.
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Source: Financial Post
