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The euro has fallen below the dollar for the first time in 20 years, as the war in Ukraine continues to hurt the currency.
One euro was bought at 0.998 dollars in foreign exchange markets, down 0.4% from yesterday when they were at parity.
Fears of a looming recession in Europe are compounded by fears that Russia may cut off gas to the old continent, while the European Central Bank is delaying raising interest rates.
In addition to these reasons, investors tend to hold more dollars in times of crisis, considered a safe haven.
This weakening of the euro will make imports more expensive for the eurozone, especially for crude oil.
Under these conditions, inflation can go even higher in Europe, while the average in June reached 8.6%.
The president of the ECB, Christine Lagarde, said that there will be an increase in the interest rate in July, followed by others in September. Currently, the rates are negative, as a measure to support the economy after the recession caused by the pandemic. But the crisis in Ukraine will reverse monetary policy as the ECB seeks to return inflation to 2% by 2024.
The European common currency has been more valuable than the dollar for most of its history. It trailed the dollar only in the first few years of its market launch in 1999, but the last time it traded below it was in December 2002 – less than a year after euro notes and coins were first introduced.
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