For the first time in 20 years, the euro falls below the dollar

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For the first time in 20 years, the euro falls below the dollar
15 Jul 2022
6 min read


News Synopsis

The euro has dropped below the dollar for the first time in nearly two decades, as the Ukrainian conflict pushes the single currency lower. At 12:45 GMT, a single euro bought $0.998 on the foreign exchange market, down 0.4 percent on the day. Fears that Russia will restrict Europe's energy supplies have increased the likelihood of a eurozone recession.

The European Central Bank has been slow to raise interest rates, further weakening the euro. Currencies typically rise when the relevant central bank raises interest rates, as international investors seek a higher return on assets denominated in that currency.

The dollar has also been strong in recent months, boosted by the US Federal Reserve raising interest rates and investors seeking the safe haven of dollar assets during times of global turmoil. A weakening currency raises the cost of imports for eurozone countries, particularly for goods priced in dollars, such as crude oil.

This could contribute to even higher eurozone inflation, which is already at 8.6 percent in June. According to an ECB spokesperson, the bank does not "target a specific exchange rate, but we are always attentive to the impact of the exchange rate on inflation, in line with our mandate for price stability."

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