Mon, June 05, 2023

The Euro Sinking, Near a Two-Year Low Against the Dollar


The euro fell to a two-year low versus the dollar on Thursday, as comments from European Central Bank President Christine Lagarde indicated that the ECB was not in a hurry to raise interest rates, in contrast to the US Federal Reserve’s rapid monetary policy tightening.

The euro dropped to $1.0758, its lowest level since April 2020. It was the last trading at $1.0827, down 0.53 percent. Lagarde said there was no clear timeline for when rates would begin to climb, adding that it might be weeks or months after the ECB’s stimulus program ended.

The ECB ended its most recent meeting on Thursday by taking moderate moves to remove assistance and avoiding a tight timeline. It reiterated that bond purchases, sometimes known as quantitative easing, will be reduced this quarter before being phased out in the third quarter. The euro fell to a one-month low against sterling, closing at 82.79 pence, down 0.28 percent.

Will Euro Fall Further?

According to Joseph Trevisani, an analyst at, Lagarde’s remarks contrasted sharply with Fed Chair Jerome Powell’s. In addition to driving up fuel costs, the Russia-Ukraine conflict, which is now in its second month, has pushed up global food prices since Russia and Ukraine are important producers of some commodities.

“Frankly, considering how uncertain things are at present, Lagarde’s prudence is understandable,” said Ima Sammani, an analyst at Monex. The dollar index (DXY) compares the greenback to six other currencies; it surged 0.544 percent to 100.33 in late afternoon trade. DXY reached a high of 100.76, its highest level since April 2020. The dollar rose further after statistics revealed that retail sales in the United States surged in March; mainly due to increasing fuel and food costs.

The damaged yen found some solace, rebounding from a 20-year low versus the dollar. It fell 0.25 percent against the dollar in midday trade, to 125.94 per dollar. More than three-quarters of Japanese companies believe the yen has depreciated to the point that it is hurting their operations. Other central banks tightened monetary policy, bolstering global interest rate expectations.


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