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Euro at a two-decade lowMEERI News

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Rising inflation, the war in Ukraine and rising energy and food prices have pushed the euro to an all-time low against the US dollar.

Euro at a two-decade low
Euro at a two-decade low
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On Thursday, the euro fell to $0.9810 against the US dollar, a 20-year low.

The euro’s depreciation came as Russian President Vladimir Putin ordered the partial mobilization of reserve troops, announced an escalation of the war in Ukraine and the Federal Reserve responded to rising inflation. Another sharp rate hike was announced.

This is the first time since October 2002 that the euro has fallen to $0.9814 against the dollar. The European Central Bank (ECB), although only recently joining the fight against inflation, is struggling to contain inflation.

Like central banks in other advanced Western economies, the ECB has consistently kept interest rates at or near zero since the 2008 financial crisis. The aim was to promote economic growth and keep inflation at a moderate level of about 2 percent.

These historic inflation rates have barely kept growth positive over the years and have not allowed inflation to rise. But global supply chains have been disrupted during the Covid-19 pandemic and the ensuing war in Ukraine, which has depressed the prices of products such as food and fuel and pushed inflation up to 10 percent. This situation forced the banks to raise interest rates.

Historic decline in international currencies

Against the British pound, the euro fell to $1.1233, a 37-year low. Major currencies such as the Thai baht, Malaysian ringgit, Singapore dollar and the Swedish krona also fell sharply.

South Korea’s won fell below the symbolic $1,400 per dollar for the first time since 2009, while the Chinese yen has fallen nearly 20 percent against the dollar this year, hitting a 24-year low of 144.29 per dollar.

Both the Australian and New Zealand dollars have reached their lowest levels since mid-2020. To counter this situation, central banks in Taiwan, Japan, the Philippines, the UK, Norway and Indonesia have raised interest rates, and in the most other countries are expected to see similar increases.


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