Euro bruised as inflation fears drive safety-seeking investors to dollar

A woman holds US dollar banknotes in front of euro banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

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SINGAPORE/HONG KONG, June 30 (Reuters) – The euro struggled to regain its footing on Thursday after falling overnight against a surging U.S. dollar, which benefited from safe-haven demand amid worries renewed on rising rates and the global recession.

The common currency was at $1.0453, up 0.13% on the day, after losing 0.75% against the dollar the previous day. It looked set for a monthly decline of 2.7% and a quarterly loss of 5.5%.

It also fell to a new 7.5-year low against the Swiss franc at 0.9963 francs at the start of Thursday’s Asian session, with the Alpine currency another beneficiary of safe-haven flows and also basking in the persistence of Switzerland. The National Bank’s surprise rate hike two weeks ago. Read more

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Christopher Wong, senior FX strategist at Maybank, attributed the euro’s fall against the dollar to the market moving away from riskier assets after “central bankers warned of sustained inflation and they would prioritize fighting it, causing the dollar to rebound broadly overnight.”

A steady and aggressive global shift toward tighter policy has stoked recessionary concerns and rattled financial markets in recent months.

Speaking at the European Central Bank’s annual conference in Sintra, Portugal, on Wednesday, US Federal Reserve Chairman Jerome Powell said it was important to bring inflation down, even if it meant hardship. economies, with similar remarks from ECB President Christine Lagarde. Read more

Lower German inflation also briefly weighed on the euro, said Ray Attrill, head of FX strategy at National Australia Bank, before “the market realized there were special factors there. low, it wasn’t a real downside surprise.”

“The biggest concern is what’s happening with energy supplies in the eurozone as we head into winter… We’re quite cautious about the euro,” Attrill added.

The dollar remained ahead against other major currencies, with the pound falling to $1.2132 as losses this week left it on a monthly decline of 3.7%, while the Australian dollar struggled to $0.6895.

The dollar also hit a new 24-year high at 137 yen overnight, as the spread between a hawkish Fed and a dovish Bank of Japan continues to weigh heavily on the yen, which was last trading. at 136.51 yen.

The BOJ is able to keep interest rates low as Japanese inflation is still low by global standards, although even small price increases pose a messaging problem for the central bank. Read more

The dollar climbed 12% against the yen in the three months to the end of June, its biggest quarterly gain since late 2016.

Bitcoin fell back below the token level of $20,000 on continued market turmoil and was also hit by the US Securities and Exchange’s rejection of an exchange-traded fund listing proposal. cash bitcoin by Grayscale, one of the world’s largest digital asset managers. Read more

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Reporting by Alun John and Rae Wee Editing by Shri Navaratnam and Kim Coghill

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