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Euro moves closer to parity with dollar

Euro moves closer to parity with dollar
The value of the euro has fallen since the Russian invasion of Ukraine and is nearing parity with the U.S. dollar. File Photo by John Angelillo/UPI | License Photo

May 20 (UPI) -- As Russia's attack on Ukraine rages on and the world still grapples with COVID-19, a recent slide in the value of the euro has brought it near parity with the U.S. dollar, market figures revealed Friday.

According to Bloomberg, the euro stood at $1.0578 compared to the dollar. The euro had fallen to $1.035 earlier this month, down from $1.137 in late 2021.

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The changes have also come as U.S. Federal Reserve raised its benchmark borrowing rate by a half percentage point earlier this month, its second increase this year, while the European bank stood pat. The Bank of England has also increased rates.

Sam Zief, global head of FX strategy at JPMorgan Private Bank, told CNBC while the exchange rate may worry some in Europe, the European Central Bank is simply looking much farther down the road.

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"Is that possible? Sure, but it's certainly not our base case, and even in that case, it does seem like euro at parity becomes your worst-case scenario," Zief said. "I don't think there's many clients that are going to look back in two to three years and think that buying euro sub-$1.05 was a bad idea."

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Stephen Gallo, European head of FX strategy at BMO Capital Markets, said as the European market continued to divest itself from Russian energy because of the war, it may be harder for it to continue its current monetary policies.

"It would not be surprising to see ECB policy inertia continue if the central bank is faced with the worst possible combination of higher recession risk in Germany and additional sharp rises in prices (i.e. the dreaded stagnation)," Gallo said, according to CNBC.

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