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Title: Euro flirts with parity as Russian gas link enters planned shutdown

Jul 11, 2022 04:26AM ET

By: AnalysisWatch

The euro held above parity against the dollar on Monday as the largest single pipeline carrying Russian gas to Germany enters its annual maintenance and gas deliveries are expected to be halted for 10 days.

Investors are concerned that the shutdown could be prolonged due to the war in Ukraine, further restricting European gas supplies and plunging the battered eurozone economy into recession.

Most of the main factors behind the pair's recent weakness - risk sentiment, divergence between the Fed and the ECB, to name just two - do not yet seem to be improving, and ongoing concerns about a reduction in Russian gas supplies to the EU are likely to continue to make the euro rather unattractive.

The euro had fallen to the edge of parity at $1.0072 on Friday after the release of higher-than-expected US employment figures for June, before recovering.

On Monday, the single currency traded 0.8% lower at $1.0107 per dollar as the greenback gained across the board on investor risk aversion.

The dollar climbed to a 24-year high against the yen on Monday after a strong election result by the ruling conservative coalition in Japan suggested no change in loose monetary policy.

It hit 137.28 yen in morning trade, its highest level since late 1998, then gave up those gains slightly and was last 0.6% higher at 136.93.

Expectations of more hot US inflation data in June will bolster bets of aggressive rate hikes by the Federal Reserve and push the dollar higher. According to a Reuter's survey, a reading of 8.8% is expected, a fresh 40-year high, compared with 8.6% in June.

The other major economic event this week is China's second quarter GDP data on Friday, with investors watching for signs of how badly the economy has been hit by the COVID-19 freezes.

The offshore yuan traded 0.4% weaker against the dollar.

Cryptocurrencies were on the retreat, with Bitcoin flirting around the $20,000 mark.

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