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Title: Euro edges back towards two-decade low as energy supply crunch adds to growth fears

Aug 24, 2022 04:33AM ET

By: AnalysisWatch

On Wednesday, the US dollar recovered some of the losses triggered by the data and returned to recent highs, while the euro remained under pressure amid growing recession fears fuelled by a possible energy supply crisis.

Disappointing U.S. services and manufacturing surveys released on Tuesday and a drop in new home sales had the dollar catching its breath after a period in which the U.S. currency reached its strongest level against the euro in two decades.

But Europe has its own growth problems stemming from its greater exposure to Russian gas supplies as the region seeks to refuel ahead of winter.

On Wednesday morning, Dutch gas, which is Europe's benchmark, rose again as the prospect of the Nord Stream 1 pipeline halting supplies kept investors on edge.

On Friday, Russia's state-owned energy company Gazprom said it would halt natural gas supplies to Europe for three days on Nord Stream 1 due to unplanned maintenance.

On Tuesday, the euro briefly bought $1, but was under pressure again in early European trading, reaching $0.9950, barely above Tuesday's low of $0.99005.

The Federal Reserve's Jackson Hole Symposium in Kansas City begins Thursday, with all eyes on Fed Chairman Jerome Powell's speech scheduled for Friday.

The dollar index, which measures the dollar's performance against a basket of six currencies, was last up 0.1 percent at 108.66, within striking distance of a two-year high of 109.29, which was reached in July.

Overnight, Federal Reserve Bank of Minneapolis President Neil Kashkari reiterated the need to raise interest rates more aggressively to control inflation.

At the same time, cyclical currencies such as the Australian and New Zealand dollars were under pressure amid concerns of a slowdown in global growth.

The Australian dollar fell 0.15 percent to $0.6920 and the Kiwi tumbled 0.23 percent to $0.6199.

The British pound held above Tuesday's 2-1/2-year low of US$1.1718, while the Japanese yen traded 0.2% higher at US$136.48 per dollar.

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