The euro hit a two-decade low against the dollar at $0.9930, stoking fears that the energy shock will keep inflation high and make a recession in Europe all but certain.
The reasons for the drop are the fact that Russia will suspend natural gas deliveries to Europe via Nord Stream 1 for three days at the end of this month, which reminded market players of the uncertainty of the situation regarding the continent’s energy supply.
Also, the heat wave in Europe has already burdened the energy supply, and there is an increasingly pronounced fear of potential supply interruptions during the winter months, which could be disastrous for business activity.
“Given the current mood in the market, there is clearly a fear of whether the pipeline will be closed for three days or whether it will be three years,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank (NAB).
The pound also sank to a fresh two-and-a-half-year low against the US currency at $1.1718, while the Japanese yen recovered to 137.24 yen to the dollar after earlier touching a one-month low of 137.705 yen to the dollar.
The Chinese yuan fell to 6.8666 yuan per dollar, its lowest level in nearly two years.