Status: 05.07.2022 2:44 p.m
The euro loses value rapidly in forex trading. At midday, the European common currency fell to its lowest level in two decades against the dollar. Parity with the dollar seems possible.
The fall of the euro against the world’s leading currency, the dollar, seems to be accelerating. At midday, the common currency was worth less in dollars than it had been in almost 20 years. Currently, only 1.0297 dollars per euro are being paid on the foreign exchange market – this corresponds to a decrease of around 1.5 euro cents alone compared to yesterday. At the beginning of the year, the common currency was still just under $1.13, about ten percent higher.
Deep fall after years of soaring
At the end of 2002, the euro had last plumbed such lows against the dollar, followed by a surge that went up to around 1.50 dollars, before first the mortgage crisis and then the euro crisis with Greece almost bankrupting the euro-dollar -Course pressed again.
Meanwhile, analysts themselves see parity as a possible scenario. That would be the first time since the single currency was introduced in 1999 that the euro would be worth less than the dollar.
Gas crisis makes recession in Europe likely
Experts see the reason for the currently accelerated decline of the euro currency in the gas crisis, which significantly increases the probability of a recession in Europe. “It will continue to be very difficult for the euro to recover in any meaningful way as the energy policy situation deteriorates and the risks to economic growth increase significantly,” said Derek Halpenny, an analyst at finance holding company MUFG.
Fiona Cincotta from the Broker City Index also sees the risk that growth in the euro zone will slow down at the end of the second quarter and contract in the coming months. In the US, the dollar is also rising on the assumption that the US Federal Reserve will continue to raise interest rates “aggressively” in order to curb inflation.
Faster turnaround in interest rates in the USA
The US Federal Reserve is proceeding with the interest rate turnaround at a much higher speed than the European Central Bank (ECB). The US Federal Reserve also raised interest rates much earlier. As a result of higher interest rates, the dollar is in particularly high demand on the foreign exchange markets, and the rate is rising.
Last but not least, the nimbus of the dollar as a crisis currency is driving many investors on the international capital markets into the “greenback”. The dollar is viewed by many investors as a so-called safe haven; Investors who want to minimize risk therefore prefer to invest their money in dollars rather than euros.