On Wednesday, the dollar pared some losses from data releases and rebounded towards recent peaks, while the euro remained under pressure amid growing recession fears fueled by a potential energy supply crisis.
The dollar took a breather following disappointing surveys of the US manufacturing and service sectors revealed on Tuesday, as well as a drop in new home sales. This comes following a rally that pushed the US currency to its strongest level once morest the Euro in 20 years.
But Europe has its own growth concerns stemming from its greater exposure to Russian gas supplies, as the region seeks to replenish stocks before winter.
Last Friday, Russian energy company Gazprom said that Russia will stop supplying natural gas to Europe for 3 days through the Nord Stream 1 pipeline due to maintenance work.
The euro briefly hit $1 on Tuesday, but was back under pressure at $0.9950 in early European trade, slightly above yesterday’s low of $0.99005.
“It is very difficult for the market to push the euro above parity,” said Simon Harvey, head of foreign exchange analysis at Monex Europe, citing concerns regarding energy supplies in Europe and the prospect of a tightening tone from the Federal Reserve at Friday’s Jackson Hole meeting.
The dollar index, which measures the performance of the greenback once morest a basket of six currencies, rose 0.1% to 108.66, close to a 20-year high recorded in July at 109.29.
gold dip
Gold prices fell on Wednesday, with the rise of the US dollar, following hawkish comments from a Federal Reserve official kept investors cautious ahead of a Fed conference later this week.
Spot gold was down 0.1% at $1,746.18 an ounce by 07:12 GMT, following rising 0.7% in the previous session, and US gold futures were down 0.1% at $1,769.20.
Attention will focus on Federal Reserve Chairman Jerome Powell’s speech at the annual World Central Banking Conference in Jackson Hole, Wyoming on Friday, to get more clues regarding the prospects for a future rate hike.
Neil Kashkari, president of the Federal Reserve Bank of Minneapolis, was the latest official to confirm that the central bank’s focus is on controlling inflation before anything else.
The US central bank has raised interest rates by a total of 225 basis points since March to contain inflationary pressures, and indicated that further tightening would depend on economic data.
Higher interest rates increase the opportunity cost of owning the non-yielding yellow metal.
