SINGAPORE/HONG KONG – The euro struggled to regain a footing on Thursday, having tumbled overnight against a resurgent US dollar, which benefited from safe-haven demand on renewed worries about higher rates and a global recession.
The euro was at $1.044, after losing 0.75 percent on the dollar the day before, and heading for a monthly decline of 2.7 percent.
It also dropped to a fresh 7-1/2-year low versus the Swiss franc at 0.99663 francs, with the Alpine currency another beneficiary of safe-haven flows and also still basking in the afterglow of the Swiss National Bank’s surprise rate hike two weeks ago.
Christopher Wong, senior FX strategist at Maybank, attributed the euro’s fall against the dollar to the market moving away from riskier assets after “central bankers warned of lasting inflation and that they would prioritise combating (it), resulting in broad dollar rebound overnight.”
A steady and aggressive global switch to tighter policy has stoked recession worries and shaken financial markets in recent months.
Speaking at the European Central Bank’s annual conference in Sintra, Portugal, US Federal Reserve Chair Jerome Powell said it was important to bring down inflation, even if it meant economic pain, with similar remarks from ECB President Christine Lagarde.
Lower German inflation figures also briefly weighed on the euro, said Ray Attrill head of FX strategy at National Australia Bank, before “the market realized that there was some special factors there, it wasn’t a genuine downside surprise.”
“The bigger picture worry is what happens with energy supplies in the eurozone as we head towards the winter… We’re quite cautious about the euro,” Attrill added.
The dollar was also on the front foot against other majors, with sterling hunkered down at $1.21225, with losses this week leaving it set for a 3.8 percent monthly decline, while the Australian dollar was struggling at $0.6873. – Reuters
