(Adds quotes, details; updates prices; changes byline; previous LONDON)
The euro rebounded on Tuesday after earlier sliding to a 20-year low and effectively reaching parity against the U.S. dollar as investors worried that an energy crisis in the region will tip the economy into recession.
The single currency reached $1.00005 against the greenback, the lowest since Dec. 2002, after data showed that German investor sentiment plunged below levels at the outset of the coronavirus pandemic in July due to energy concerns, supply bottlenecks and rate hikes from the European Central Bank.
“For all intents and purposes, it effectively reached parity,” said Mazen Issa, senior FX strategist at TD Securities in New York.
“It seems like it’s a very gloomy outlook for the euro…. a sub-parity paradigm is very much in the cards,” Issa said, adding that the single currency could drop to the $0.85-$0.90 area against the greenback.
The dollar is benefiting from expectations that the Federal Reserve has more room to hike rates than peers, which are facing more challenging growth outlooks.
Concerns that Europe could fall into a recession have increased since the biggest single pipeline carrying Russian gas to Germany, the Nord Stream 1 pipeline, began annual maintenance on Monday. Governments, markets and companies are worried the shutdown might be extended because of the war in Ukraine.
The single currency was last $1.0050, after bouncing from the $1 level, which some analysts attributed to technical factors relating to options activity and short-covering. EUR=EBS
Neil Jones, head of currency sales at Mizuho, said markets had been 'short' on the euro in anticipation of a break below parity, but "we didn't get it and now these shorts are buying back into the early New York market."
A possible catalyst that could push the euro back lower could be highly anticipated inflation data on Wednesday, which is expected to show that U.S. consumer prices rose by an annual rate of 8.8% in June. USCPNY=ECI
"We may have to wait for U.S. CPI...or a clearer picture for European energy markets once planned maintenance in Nord Stream comes close to finalising for euro-dollar to break the (parity) threshold," said Simon Harvey, head of FX at Monex Europe.
Meanwhile the Australian dollar rebounded from a two-year low, after being hurt by global growth concerns as China implements new COVID-19 curbs.
The Aussie was last up 0.22% at $0.6752, after earlier falling to $0.6712, the lowest since June 2020. AUD=D3
The U.S. dollar fell 0.55% against the Japanese yen to 137.33, after hitting 137.73 on Monday, the strongest level in 24 years. JPY=D3
In the cryptocurrency market bitcoin dipped 0.46% to $19,858. BTC=BTSP
======================================================== Currency bid prices at 10:40AM (1440 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 108.0600 108.1600 -0.08% 12.959% +108.5600 +107.9600 Euro/Dollar EUR=EBS $1.0050 $1.0041 +0.09% -11.60% +$1.0070 +$1.0001 Dollar/Yen JPY=EBS 136.6450 137.4150 -0.55% +18.72% +137.5300 +136.4700 Euro/Yen EURJPY= 137.33 137.93 -0.44% +5.38% +138.0700 +137.0300 Dollar/Swiss CHF=EBS 0.9814 0.9834 -0.19% +7.60% +0.9858 +0.9813 Sterling/Dollar GBP=D3 $1.1870 $1.1894 -0.23% -12.25% +$1.1909 +$1.1808 Dollar/Canadian CAD=D3 1.3021 1.3006 +0.11% +2.97% +1.3050 +1.2997 Aussie/Dollar AUD=D3 $0.6752 $0.6737 +0.22% -7.12% +$0.6760 +$0.6712 Euro/Swiss EURCHF= 0.9863 0.9869 -0.06% -4.88% +0.9898 +0.9837 Euro/Sterling EURGBP= 0.8465 0.8440 +0.30% +0.77% +0.8484 +0.8434 NZ NZD=D3 $0.6127 $0.6114 +0.16% -10.53% +$0.6137 +$0.6103 Dollar/DollarDollar/Norway NOK=D3 10.2150 10.1930 +0.31% +16.06% +10.2675 +10.2070 Euro/Norway EURNOK= 10.2724 10.2409 +0.31% +2.59% +10.2892 +10.2403 Dollar/Sweden SEK= 10.5671 10.6317 -0.55% +17.18% +10.6843 +10.5425 Euro/Sweden EURSEK= 10.6207 10.6793 -0.55% +3.78% +10.6926 +10.6044 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Euro parity https://tmsnrt.rs/3z7V7Nn^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
