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The
European single currency fell 2.1% this week, and was set for
its worst week since April 2020.
It was down 0.5% to $1.1010 at 0850 GMT, near its weakest level
since May 2020, following news Russian forces seized the largest
nuclear power plant in Europe after a building at the complex
was set ablaze during fighting with Ukrainian defenders,
Ukrainian authorities said on Friday.
Authorities later said the fire in a building identified as a
training centre had been extinguished. U.S. Energy Secretary
Jennifer Granholm said there were no indication of elevated
radiation levels at the plant.
Versus sterling, the euro also hit its weakest level of 82.61
pence since July 2016. It touched its lowest level since January
2015 of 1.0114 against the safe-haven Swiss Franc.
Analyst said the effects of surging energy and gas prices will
likely undermine European consumption and economic growth
prospects.
"The ECB is going to have no alternative but to look through
this surge in inflation but the Fed is not going to delay so we
will see more monetary divergence again," said Mike Kelly, head
of global multi-asset at PineBridge Investments.
"The dollar should be getting a new spring in its step
structurally if things do get worse," Kelly added.
The U.S. dollar index rose 0.36% to 98.073, after touching its
highest level since June 2020 against a basket of peers.
While money markets do not expect interest rate hikes at the
ECB's next meeting, the U.S. Federal Reserve is all but certain
to raise interest rates at its March 15-16 meeting for the first
time since the coronavirus pandemic.
Fed Chair Jerome Powell repeated his comments that he would back
an initial quarter percentage point increase in the benchmark
rate.
In Ukraine, Russian forces were pressing on with surrounding and
attacking cities.
Elsewhere, the Australian dollar continued its advance, helped
by the commodities boom, and rose 0.6% to a four-month high of
$0.7370 versus the U.S. dollar.
High energy prices in turn have prevented the Japanese yen from
benefiting as much from the safe haven flows, as Japan is a net
importer of energy.
The yen briefly climbed on the dollar when news of the fire
emerged, but later gave up those gains and was little changed at
115.37 per dollar.
(Reporting by Joice Alves, additional reporting by Sujata Rao,
Alun John; Editing by Robert Birsel)
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