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Euro slides as war in Ukraine stokes inflationary shock -Breaking


© Reuters. FILEPHOTO: This illustration was taken in Frankfurt on May 7, 2017 and features Euro bank notes as well as the U.S. Dollar. May 7, 2017. REUTERS/Kai Pfaffenbach/Illustration

Tom Westbrook

SINGAPORE (Reuters – As the conflict in Ukraine pushed up commodities prices, fears of a stagflationary surprise that would most hurt Europe and stoke fear of a global economic collapse fueled by worries about the euro plummeting to a 22-month high on the dollar.

Early Asia trade saw the common currency drop to $1.0864 by 0.6%, its lowest point since May 2020. It is now on track for a 2020 low of around $1.0636.

For the first time in 2015, it fell below 1 Swiss Franc. It was 0.9982.

As the United States and Europe lift bans on Russian imports, oil futures jumped 10%, jumping more than 20%. European gas prices reached a new record Friday.

“This is very bad news for global growth – particularly Europe, given their dependence on gas from Russia,” ANZ analysts said in a note.

It’s a big supply shock, combined with lingering COVID effects, that has serious inflationary implications, and leaves central banks no choice but to deny growth any chance.

The fighting intensified this weekend, and all attempts to reach a ceasefire that would allow civilians to flee Mariupol have failed so far.

Russia called the February 24th campaign “special military operations” and said it does not intend to invade Ukraine.

With export prices rising, the euro fell to an unprecedented low of 124.78yen (15 months ago) and hit its lowest point since mid 2016.

Australian dollars rose 0.3% to $0.7390, a new four-month record. Australian coal spot prices have risen more than 70% over the past week, as customers look to find alternatives to Russian energy. Another Australian export is wheat, which has risen by about half a percent since February. The sliding euro has pushed the price up by more than 10% over the past month. [AUD/]

New Zealand’s dollar hit a 7-week high of $0.6879. However, some analysts believe gains may be at risk if geopolitical conditions worsen and war escalates.

Sterling was affected by the selling of euro currency and dropped to $1.3201 on Friday. [GBP/]

Also, the U.S. Dollar rose against the Japanese yen as well as the Swiss franc. Last up 0.4% on the Franc to 0.9200 but 0.3% on the Yon at 114.93.

Near Friday’s 22 month high of 98.925, the steadying was at 98.826, close to Friday.

These events include U.S. inflation data as well as a European Central Bank Meeting (ECB) later in this week.

According to a Reuters poll, economists believe the ECB won’t raise rates until the end of the year.

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