The euro and the pound sterling fell to multi-year lows against the US dollar in trading on Friday.
The ICE-calculated index showing 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) soared to a record level, exceeding 112 points.
As of 15:10 Moscow time, it adds 0.78%, the broader WSJ Dollar Index – 0.74%.
The euro/dollar pair is trading at $0.9754 compared to $0.9838 at the close of the previous session. During the session, the euro exchange rate updated the minimum since 2002, dropping to $0.9737.
The pound sterling, meanwhile, hit a new low since 1985 against the dollar, dropping to $1.1020. By 15:10 Moscow time, the pound exchange rate is $1.1062.
The US currency is supported both by expectations of further tightening of the Federal Reserve System (Fed) policy, and by a general increase in demand for “safe haven” assets in the face of growing geopolitical tensions and forecasts of a global recession.
The euro remains under serious pressure due to growing fears of a protracted war on the territory of Ukraine after the announcement of partial mobilization in Russia, Market Watch notes.
The Eurozone Composite Purchasing Managers’ Index (PMI) fell to 48.2 in September from 48.9 in August, according to preliminary data from S&P Global. The index value indicates a decline in activity in the region for the third month in a row.
The Fed’s hawkish statements have prepared investors for a long cycle of rate hikes in the US, said Thomas Flury, an economist at UBS Global Wealth Management. “Given forecasts of a recession in Europe as a result of the intensifying energy crisis, the euro against the dollar will continue to decline.”
Meanwhile, Britain’s Chancellor of the Exchequer, Kwazi Kwarteng, presented the government’s new plan to the House of Commons on Friday, which would see massive tax cuts to support the ailing economy. The British Debt Management Office (DBO) raised its estimate of the state budget’s borrowing needs for the current fiscal year by almost 1.5 times after the tax cut announced on Friday.
The dollar rose to 142.73 yen against the yen from 142.37 yen at market close on Thursday.
The US dollar against the yuan rose 0.6% to 7.1193 yuan. During the session, it rose to the level of 7.1173 yuan, which is 1.8% higher than the reference rate set by the Chinese Central Bank on Friday. The People’s Bank of China allows exchange rate fluctuations of 2% from the reference in one direction or another. A deviation of more than 1.9% was last recorded in August 2015.
