The euro fell to below 99 cents against the US dollar in early trading on Monday, the steepest decline in two decades as the energy crisis in Europe compounds the effects of surging inflation.
The single currency, which came into physical circulation in 2002, was trading at $0.9886 against the greenback at 9.25am UAE time.
The euro has been trading below or near parity for the past two weeks. It has dropped more than 12 per cent against the dollar this year, dragged down by historically high inflation, low consumer confidence and an energy crisis amid a face-off between Europe and Russia over Moscow’s war in Ukraine.
On Friday, Russia’s state energy company Gazprom said it would halt supplies to Europe via the Nord Stream 1 pipeline indefinitely.
The announcement came after G7 member countries said they aimed to enforce a price cap on Russian oil to reduce Moscow’s revenue and crimp its ability to finance its war in Ukraine, which is now in its seventh month.
“The energy situation in Europe was already looking parlous for households and businesses this winter, and now looks even worse following Russia’s announcement on Friday that the Nord Stream 1 pipeline would be closed indefinitely,” said Daniel Richards, an economist at Emirates NBD.
In 2021, EU members imported 155 billion cubic metres of natural gas from Russia, which accounted for about 45 per cent of the bloc’s gas imports and close to 40 per cent of its total gas consumption, according to the International Energy Agency.
Rising energy prices have pushed inflation in the euro area to a record 9.1 per cent in August, from 8.9 per cent in July, according to flash figures from Europe’s statistics office Eurostat.
Inflation is a major concern for the European Central Bank, which raised interest rates by 50 basis points to zero on July 21 — its first rate increase in 11 years.
