Euro drops against U.S. dollar amid renewed safe-haven demand
By Joice Alves
LONDON (Reuters) – The euro fell to a two-week low towards the U.S. greenback and remained near a 2015 low versus the Swiss franc amid safe-haven demand on renewed worries about larger charges and a worldwide recession.
The Swedish crown trimmed early positive aspects towards the euro after briefly leaping on the nation’s central financial institution choice to hike its benchmark rate of interest by 50 foundation factors as anticipated.
Rising issues round recession within the euro zone linked to the power disaster amid the conflict in Ukraine have strengthen safe-haven flows towards the euro.
The frequent forex was set for its worst quarter towards the greenback for the reason that finish of 2016, on monitor for a 6% quarterly decline. At 1057 GMT, it was 0.36% decrease on the day versus the greenback at $1.0404.
It additionally dropped to a recent 7-1/2-year low versus the safe-haven Swiss franc at 0.9964 francs, with the Swiss forex nonetheless basking within the afterglow of the Swiss Nationwide Financial institution’s shock charge hike two weeks in the past. The euro was final 0.08% larger versus the Swiss franc at 0.9979.
Contemporary gloomy financial knowledge for the euro zone confirmed that French inflation climbed to a report excessive of 6.5% in June, whereas Greece reduce its development forecast to three.2% this yr from 3.8%.
Euro zone unemployment fell to a brand new report low in Might because the financial system continued to rebound from the COVID-19 pandemic, even when inflation exacerbated by Russia’s invasion of Ukraine is predicted to dampen development.
The lower-than-expected unemployment charge could bolster European Central Financial institution President Christine Lagarde’s confidence to hike charges, mentioned Alex Livingstone, head of buying and selling at Titan Asset Administration. “Nonetheless, the ECB will should be extraordinarily cautious of their subsequent transfer, making an attempt to keep away from smothering development.”
A U.S. recession over the following 12 months is “in all probability extra possible than not,” PIMCO international chief funding officer for fastened earnings Andrew Balls mentioned.
The ECB is predicted to boost rates of interest in July for the primary time in a decade to attempt to cool accelerating inflation, though economists are divided on the magnitude of any hike.
Lagarde and U.S. Federal Reserve Chair Jerome Powell, talking on Wednesday on the ECB’s annual convention in Sintra, Portugal, mentioned it was necessary to carry down inflation, even when it meant financial ache.
The Swedish crown was down 0.3% towards the euro at 10.7190 after briefly leaping 0.4% towards the euro to 10.6410 following Sweden’s Riksbanken charge hike to 0.75%.
“Being well-priced and in keeping with market consensus, the 50bp hike didn’t rock the water because the SEK is worried,” Danskebank analysts informed shoppers in a notice.
The greenback rose to a two-week excessive towards a basket of friends, with the index up 0.3% at 105.37.
The greenback additionally traded just under a recent a 24-year peak of 137 Japanese yen touched on Wednesday, because the hole between a hawkish Fed and a dovish Financial institution of Japan continues to weigh closely on the yen, which was final buying and selling at 136.4 yen .
Bitcoin dipped again under the symbolic $20,000 degree on persistent market ructions, and was additionally damage by the U.S. Securities and Alternate Fee rejecting a proposal to listing a spot bitcoin exchange-traded fund by digital asset supervisor Grayscale.
(Reporting by Joice Alves; Modifying by Alison Williams and Mark Porter)
