Samuel Indyk
LONDON (Reuters) – The dollar recovered some of its data-driven losses on Wednesday and climbed back to recent highs, while the euro rallied as recession fears mounted Still under pressure due to a possible energy supply crunch.
Disappointing U.S. services and manufacturing surveys and a slump in new home sales on Tuesday gave the dollar a breather, after the greenback rose against the euro The exchange rate rose to its highest level in 20 years.
But Europe also has its own growth concerns, as the region seeks to refuel ahead of winter and therefore has greater exposure to Russian gas supplies.
Front-month Dutch gas, the European benchmark, rose again on Wednesday morning as the prospect of a supply disruption to the Nord Stream 1 pipeline made investors nervous.
On Friday, Russia’s state energy company Gazprom said Russia would stop gas supplies to Europe via Nord Stream 1 for three days due to unscheduled maintenance.
The euro briefly bought $1 on Tuesday, but retreated to $0.9950 in European morning trade – just above Tuesday’s low of $0.99005.
“It’s going to be difficult for the market to push the euro back above parity,” said Simon Harvey, head of foreign exchange analysis at Monex Europe, citing energy supply concerns in Europe and a likely hawkish Fed. later this week.
The Kansas City Fed’s Jackson Hole Symposium opens Thursday, and all eyes will be on Fed Chairman Jerome Powell’s speech scheduled for Friday.
The U.S. dollar index, which measures its performance against a basket of six currencies, was last up 0.1% at 108.66, just one step away from July’s two-decade high of 109.29.
“Market participants remain focused on Friday’s Jackson Hole Symposium as the main event of the week,” said Michael Brown, head of market intelligence at Caxton in London .
“With Fed Chair Powell likely to be hawkish on Friday, I expect the dollar to resume its recent gains soon,” added Brown, who expects the dollar index to break past July highs.
Overnight, Minneapolis Fed President Neil Kashkari reiterated the need to raise interest rates more aggressively to control inflation.
Meanwhile, cyclical currencies such as the Australian and New Zealand dollars have come under pressure on fears of slowing global growth.
The Australian dollar was down 0.15% to $0.6920 and the New Zealand dollar was down 0.23% to $0.6199.
Sterling hovered above a 2-1/2-year low of $1.1718 hit on Tuesday, while the yen rose 0.2% to $136.48.
(Reporting by Samuel Indyk in London, Additional reporting by Rae Wee in Singapore; Editing by Tomasz Janowski)
