For the first time in 20 years, the euro exchange rate fell to parity against the US dollar on fears that the crisis in the European economy may be more significant than in the United States.
The euro/dollar is trading at $1.0017 at 8:55 am KST, compared to $1.0043 at the market close on Tuesday, with the euro shedding about 0.3%. During overnight trading, the euro traded against the dollar at a parity rate.
The ICE-calculated index, which shows the dynamics of the dollar against six currencies (the euro, the Swiss franc, the yen, the Canadian dollar, the pound sterling and the Swedish krona), rises by 0.4% to 108.43 points. Over the past five sessions, the index has gained 1.8%. The broader WSJ Dollar Index added 0.2%.
The dollar has been gaining in price lately as traders consider the US currency a defensive asset that will help save capital in the event of a recession in the global economy, writes Trading Economics.
In addition, the dollar is supported by expectations that the Federal Reserve System (Fed) will again raise the key interest rate by 75 basis points in July in order to curb inflation, which has been a record for 40 years.
June US consumer price data will be released on Wednesday. Experts expect inflation in the country to accelerate to 8.8% from 8.6% a month earlier.
The value of the pound fell during trading on Tuesday by 0.3% to $1.1861 against $1.1892 at the close of the previous session.
The exchange rate of the American currency paired with the yen is stable and is around 137.44 yen.
