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EURO FALLS BELOW PARITY AGAINST DOLLAR FOR THE FIRST TIME IN TWO DECADES

Updated: May 26, 2023

Euro was negotiated at US$ 0.998, drop of 0.4% on the day, the lowest level since December 2002.

cédulas de euro e dolar com mao segurando - xplore group

Euro falls below parity against dollar on Wednesday (13) for the first time in almost two decades, according to the news agency Reuters. The drop below parity happened after the announcement of more robust data on U.S. inflation.


The possibility of the U.S. Federal Reserve increasing interest rate and the mounting concern over the increase in the risk of recession in the eurozone continue to pressure the single currency.


Euro was negotiated at US$ 0.998, drop of 0.4%, the lowest level since December 2002.

According to Reuters, the single currency lost more than 10% so far this year against one dollar on the rise.


Rising inflation

Consumer inflation in the United Stated accelerated in June, once the fuel and food prices remained high, resulting the highest year rate in 40 years and a half and confirming the expectations that the Federal Reserve will increase interests at 0.75 percentage point by the end of the month.


In the 12 months until June, consumer prices boosted 9.1%, from 8.6% in May. This was the greatest advance in November 1981.


Consumer prices are going up in the middle of troubles with global supply chains and massive tax stimuli from the government adopted in the beginning of the Covid-19 pandemic.

The war ongoing in Ukraine, which provoked a peak of global prices of food and fuel, worsened the situation.

Parity the day before

On Tuesday (12), euro reached for the first time parity with dollar since 2002, year in which the European currency started to circulate.


The devaluation of the European currency upon the U.S. currency has been pushed given the concerns that an energy crisis will lead Europe to recession. At the same time, the U.S. currency keeps revaluing based on the expectations that the Federal Reserve will raise interest rates faster than what is expected.

SOURCE: G1



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