Euro slumps to 20-year low, close to dollar parity

The euro slumped to a 20-year low and approached dollar parity on Monday on concerns that an energy crisis will tip the region into a recession.

In the meantime, the dollar was boosted by expectations that the Federal Reserve will hike rates faster and further than peers.

The biggest single pipeline carrying Russian gas to Germany, the Nord Stream 1 pipeline, began 10 days of annual maintenance on Monday. Germany and other European countries are watching anxiously to see if the gas comes back on with relations between Russia and the West at their lowest in years because of the Russia-Ukraine conflict.

"The most proximate concern for markets is whether or not Nord Stream 1 is going to come back online," said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, adding that "the markets will likely price in a recession" for the region if it doesn't.

The euro tumbled as low as $1.0051 against the U.S. dollar, the weakest since December 2002. The dollar index reached 108.19, the highest since October 2002.

The U.S. currency has gained on expectations that the Fed will continue to aggressively raise rates as it tackles soaring inflation.

The Fed is expected to lift rates by 75 basis points at its July 26-27 meeting. Fed funds futures traders are pricing for its benchmark rates to rise to 3.50 percent by March, from 1.58 percent now.

(CGTN)