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has been traded euro Against about $ 0.9998 on Wednesday, in a precedent since the beginning of trading in the European currency, before recording a new high, down by about 12 percent since the beginning of the year, the lowest level since 2002.
Analysts and economists believe that the decline in the price of the euro against dollar Many effects, while it is a positive factor for eurozone exporters who may see an increase in demand for their relatively cheaper goods, but it makes imports more expensive, which increases concerns inflation Increasing the prices of goods and products.
The euro suffers from several crises, foremost of which is the Russian-Ukrainian war, which contributed to the rise in prices oil In addition to the delay of the Central Bank in raising interest rates, despite the highest inflation rates in nearly 40 years.
For years, European policymakers have welcomed a weak currency as a way to stimulate economic growth, as it makes the bloc’s exports more competitive. But now, with a high inflation In the eurozone to its highest levels since such records began, currency weakness is no longer desirable because it promotes higher prices by making imports more expensive.
On top of those who warned against the euro’s depreciation against the dollar, ECB Governing Council member Francois Villeroy de Gallo said that the bank would carefully monitor developments in the effective exchange rate, as an important driver of imported inflation.
stressed that "The decline in the price of the euro in its current form will contradict our goal of price stability".
Estimated paper published European Central Bank In 2020, a 1 percent depreciation of the euro against the basket of currencies could add up to 0.11 percentage point to inflation within a year, and 0.25 percentage point over three years.
repercussions of war
In turn, the economic analyst and professor of finance and investment, Mustafa Badra, sees in exclusive statements to the site "Sky News Arabia"it’s a "Simply; The currency is a reflection of the economic conditions in its region, which indicates that the situation in the eurozone is in a severe crisis, and this became clear with the devaluation of the currency".
Badra stressed that "The significant decline, which has not occurred in 20 years, reflects the precarious economic situation of the Russian-Ukrainian war, and the effects of sanctions on Moscow The counter-sanctions imposed by the Russian regime on Europe and the United States, which put great pressure on the currency".
The economic analyst expected that there would be more decline for the euro, with the US Federal Reserve’s decision to raise the price Benefit Again, this affects the investment conditions in the whole world.
Russian threats
European analysts have warned that "The euro may not have reached its lows given the continuing risks of the threat of a Russian gas cut that could push the region into a deep recession".
European estimates suggest that this scenario could in turn significantly constrain the ECB’s ability to raise interest ratesWhich he hasn’t done yet.
Russia does not compromise in dealing with a card GasIt cut supplies to some European Union countries, and recently cut off flows in the Nord Stream pipeline to Germany by 60 percent.
Says analyst Jane Foley at "Rabobank" For financial services: "To what extent can the deterioration of the euro go? This most likely depends on Russia’s desire to aggravate the economic war with Europe".
He pointed out that "Know the intentions of Russian President Vladimir Putinit is not easy"according to Agence France-Presse.
This comes at a time when the US Federal Reserve is heading towards a new interest rate increase of 75 basis points later this month, as it seeks to curb rapid inflation, according to a report published by the newspaper. "The New York Times".
Badra said that the US Federal Reserve announced its intention to raise the interest rate several times during the current year, which will have repercussions on all kinds investment Whether in currencies, stock exchanges or psychological metals, as well as commodities, crops and oil prices.
In June, consumer prices in the euro area jumped 8.6 percent from the previous year. Some monetary policy makers highlighted the weakness of the euro as a risk to the central bank’s target of returning inflation to 2 percent in the medium term.
Effects on Euro Holders
Badra pointed out that the holders of the euro will be severely affected by this decline against the dollar, as the value of their investments will decline, in addition to the decrease in the import capacity, driven by the decline in the currency.
Says an economist at a bank "ING" Investor Chris Turner, it "If the euro continues to fall, there is no doubt that the ECB will be very worried about this move".
He explained that "Faced with the looming threat of a recession, the European Central Bank’s hands may be constrained in its ability to maneuver to raise interest rates further in defense of the euro".
In addition, Mustafa Badra says: "Global influences The war in Ukraine Its features have become very clear in the euro area with the currency depreciating dramatically".
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has been traded euro Against about $ 0.9998 on Wednesday, in a precedent since the beginning of trading in the European currency, before recording a new high, down by about 12 percent since the beginning of the year, the lowest level since 2002.
Analysts and economists believe that the decline in the price of the euro against dollar Many effects, while it is a positive factor for eurozone exporters who may see an increase in demand for their relatively cheaper goods, but it makes imports more expensive, which increases concerns inflation Increasing the prices of goods and products.
The euro suffers from several crises, foremost of which is the Russian-Ukrainian war, which contributed to the rise in prices oil In addition to the delay of the Central Bank in raising interest rates, despite the highest inflation rates in nearly 40 years.
For years, European policymakers have welcomed a weak currency as a way to stimulate economic growth, as it makes the bloc’s exports more competitive. But now, with a high inflation In the eurozone to its highest levels since such records began, currency weakness is no longer desirable because it promotes higher prices by making imports more expensive.
On top of those who warned against the euro’s depreciation against the dollar, ECB Governing Council member Francois Villeroy de Gallo said that the bank would carefully monitor developments in the effective exchange rate, as an important driver of imported inflation.
He stressed that “the decline in the price of the euro in its current form will contradict our goal of price stability.”
Estimated paper published European Central Bank In 2020, a 1 percent depreciation of the euro against the basket of currencies could add up to 0.11 percentage point to inflation within a year, and 0.25 percentage point over three years.
repercussions of war
In turn, the economic analyst and professor of finance and investment, Mustafa Badra, believes in exclusive statements to “Sky News Arabia”, that “simply; the currency”.
Badra stressed that “the significant decline, which has not occurred in 20 years, reflects the dire economic situation as a result of the Russian-Ukrainian war, and the effects of sanctions on the country.” Moscow The counter-sanctions imposed by the Russian regime on Europe and the United States, which put significant pressure on the currency.
The economic analyst expected that there would be more decline for the euro, with the US Federal Reserve’s decision to raise the price Benefit Again, this affects the investment conditions in the whole world.
Russian threats
European analysts had warned that “the euro may not have reached its lowest levels due to the continuing risks of the threat to cut off Russian gas, which could push the region into a deep recession.”
European estimates suggest that this scenario could in turn significantly constrain the ECB’s ability to raise interest ratesWhich he hasn’t done yet.
Russia does not compromise in dealing with a card GasIt cut supplies to some European Union countries, and recently cut off flows in the Nord Stream pipeline to Germany by 60 percent.
“How far can the euro’s decline go? It probably depends on Russia’s desire to aggravate the economic war with Europe,” says analyst Jane Foley at financial services firm Rabobank.
He noted that “knowing the intentions of Russian President Vladimir PutinIt’s not easy,” he said, according to Agence France-Presse.
This comes at a time when the US Federal Reserve is heading towards a new interest rate increase of 75 basis points later this month, as it seeks to curb rapid inflation, according to a report published by the New York Times.
Badra said that the US Federal Reserve announced its intention to raise the interest rate several times during the current year, which will have repercussions on all kinds investment Whether in currencies, stock exchanges or psychological metals, as well as commodities, crops and oil prices.
In June, consumer prices in the euro area jumped 8.6 percent from the previous year. Some monetary policy makers highlighted the weakness of the euro as a risk to the central bank’s target of returning inflation to 2 percent in the medium term.
Effects on Euro Holders
Badra pointed out that the holders of the euro will be severely affected by this decline against the dollar, as the value of their investments will decline, in addition to the decrease in the import capacity, driven by the decline in the currency.
“If the euro continues to fall, there is no doubt that the European Central Bank will be very concerned about this move,” says Chris Turner, an economist at investment bank ING.
“Faced with the looming threat of a recession, the European Central Bank’s hands may be constrained in its ability to act,” he explained maneuver to raise interest rates further in defense of the euro.
In addition, Mustafa Badra says: “The global effects of The war in Ukraine It has become very clear in the euro area with the currency depreciating significantly.”