Dollar Value Hits Five-Year High Amid Sharp Decline of Yen and Euro

Euro Falls 4.6% This Month Amid Growing European Economic Uncertainty... Largest Drop in 7 Years

[Asia Economy Reporter Byunghee Park] Following the Japanese yen, the euro also plunged sharply, causing the dollar's value to soar to a five-year high. It is also eyeing the highest level in 20 years.

The dollar index, which reflects the relative value of the dollar against six major currencies, surpassed 103.28, a five-year high, on the 27th (local time), according to major foreign media. The media added that the dollar index's upward trend is approaching 103.82, the highest level in 20 years recorded in 2002.

The sharp rise in the dollar index on this day was largely due to the euro's value dropping about 1% against the dollar. Russia's announcement to cut gas supplies to Bulgaria and Poland increased economic uncertainty in Europe, which acted as a negative factor for the euro.

The euro-dollar exchange rate traded as low as $1.0515 per euro at one point, marking the lowest level of the euro against the dollar since March 2017. The euro has been weak since early February, just before the outbreak of the Ukraine war, and the recent decline has accelerated. The euro has fallen 4.6% this month, recording the largest monthly drop in over seven years.

Athanasios Bambakidis, head of foreign exchange investment strategy at Bank of America (BOA), said it might be premature but predicted that if negative factors such as sanctions on Russia's energy sector arise, the euro-dollar parity could be reached. Euro-dollar parity means the euro and dollar values are equal, with 1 euro equaling 1 dollar.

The expectation that the U.S. Federal Reserve (Fed) will raise the benchmark interest rate by 0.5 percentage points at the Federal Open Market Committee (FOMC) meeting on July 3-4 has accelerated the dollar's strength and the euro's decline.

Attention is focused on whether the European Central Bank (ECB) will change its monetary policy stance due to the euro's weakness. The euro's weakness could stimulate inflation in Europe. The ECB has been cautious about tightening measures such as raising benchmark interest rates, but recently there are forecasts that the ECB may hasten rate hikes. Goldman Sachs predicted that the ECB could raise the benchmark interest rate in July.

This content was produced with the assistance of AI translation services.