SINGAPORE- The US dollar retreated further on Wednesday as the euro extended its overnight bounce on relief Europe might avoid the worst fears concerning energy shortages, and on the chance the European Central Bank may deliver a more aggressive rate hike.
Russian gas flows via the Nord Stream 1 pipeline are seen restarting on time on Thursday after the completion of scheduled maintenance, Reuters reported on Tuesday.
The euro tacked on 0.25 percent to $1.0245, having risen 0.75 percent the previous day, its strongest daily gain in a month.
Aiding sentiment was news that the ECB is considering raising interest rates by a larger-than-expected 50 basis points at their meeting on Thursday.
“If we do see Russian gas flows resume tomorrow, that will be good news for the euro/dollar and in the near term, euro can get a little boost and get away further from parity,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
“But I am still worried about the euro/dollar, I think downsides still persist … the potential hawkish pivot from the ECB may not be able to give sustained support.”
The euro has lost about 2.3 percent since the beginning of July, and broke parity with the dollar for the first time in two decades last week following a red-hot US inflation print and fears about a sharp economic downturn in the eurozone.
Other major currencies similarly rallied on the back of the weakening greenback, and as central banks around the world become more hawkish in their efforts to tame soaring inflation.
