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5 Sep, 2022 11:00

Euro nosedives to 20-year low

The currency has sunk below parity with the US dollar amid growing energy supply concerns
Euro nosedives to 20-year low

The EU’s common currency, the euro, plunged below $0.99 for the first time in 20 years on Monday, after Russia said it would shut off its main gas supply pipeline to Germany indefinitely.

As European markets opened, the euro dropped as much as 0.7% to $0.9880 versus the US dollar, the weakest since 2002. It was trading at around $0.9922 against the greenback as of 09:45 GMT.

“Euro has more downside given the full impact from the indefinite cut in Russia gas supply to Europe is yet to come,” Rodrigo Catril, currency strategist at National Australia Bank told the Indian financial newspaper Mint. “No gas means no growth and a hawkish ECB,” he added.

Last week, Goldman Sachs analysts cut their forecasts for the euro to $0.97 over the next three months from $0.99 previously. The analysts also project the euro will remain below parity with the dollar over a six-month period. Previously they predicted a recovery to $1.02.

On Friday, Russian energy supplier Gazprom said it would not resume natural gas deliveries to Germany via the key Nord Stream 1 pipeline due to a malfunctioning turbine.

Nord Stream 1 had been operating at reduced capacity since June due to the shutdown of several gas turbines. Gazprom has cited faulty or delayed equipment due to Western sanctions as the main reason for the reduction of deliveries.

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