Band Saikat Chatterjee and Dhara Ranasinghe
LONDON, July 11 (Reuters) – The euro fell to parity against the dollar on Monday as the biggest pipeline carrying Russian gas to Germany went into annual maintenance, with flows set to stop for 10 days.
Investors fear the shutdown could be extended due to the war in Ukraine, further restricting European gas supplies and tipping the struggling eurozone economy into recession.
“What’s interesting is that we are reversing Friday’s rebound,” said Kenneth Broux, currency strategist at Societe Generale.
“It looks likely we will test parity – we have two big reports from the US and that could be another catalyst,” he said, referring to inflation and retail sales data.
The single currency was last down 0.8% at $1.0105 to the dollar on the greenback’s broad gains as risk aversion gripped investors EUR=EBS.
It fell to the edge of parity at $1.0072 on Friday after the release of a higher-than-expected US payrolls figure for June before bouncing higher.
Broux said the euro was only likely to rally once the European economic outlook improved and the possibility of aggressive U.S. rate hikes subsided.
ING analysts added that with energy supplies unlikely to improve and central bankers showing no signs of being distracted by the tightening cycles, the worst case scenario for the euro was that it was heading towards $0.95 in July.
The dollar climbed to a 24-year high against the yen after strong elections for Japan’s conservative ruling coalition signaled no change in accommodative monetary policies.
It reached 137.28 yen JPY=EBS in morning trade, the firmest since late 1998. It was up 0.7% at 136.07.
Expectations of another searing printout of US inflation data for June will bolster bets of aggressive rate hikes from the Federal Reserve and could propel the dollar higher. A Reuters poll expects a reading of 8.8%, a new high in 40 years, from 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 the economy getting tough from COVID-19 lockdowns.
The offshore yuan was trading CNH=EBS 0.3% weaker against the dollar.
Cryptocurrencies were in retreat with Bitcoin BTC=BTSP flirting around the $20,000 levels.
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(Reporting by Saikat Chatterjee and Dhara Ranasinghe; Editing by Kirsten Donovan)
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