The euro fell below the dollar for the first time in 20 years

The euro today fell below par against the dollar for the first time in nearly two decades, as fears of aggressive monetary policy tightening and growing worries of an impending recession in the eurozone continued to weigh on the common European currency.

The new drop in the euro came shortly after the negative surprise caused once again by US inflation data.

Investors fear that aggressive monetary policy tightening could trigger a recession, and markets estimate that U.S. inflation data could spark a fresh rally in the dollar.

Against this backdrop, the common European currency saw its exchange rate fall as low as 0.9998 against the greenback, down 0.4%, to its lowest level since December 2002.

It is noted that since the beginning of the year the euro has lost more than 12% against the American currency.

“Gas constraints, stagnant inflation and an expected recession are all good reasons to be bearish on the euro,” said Stuart Cole, chief economist at Equiti Capital, shortly before the dollar lost ground on euro.

According to him, these factors will make it difficult for the European Central Bank to raise interest rates, further widening the gap with the United States.

It is worth noting that since it became widely available in 1999, the single European currency has spent some time below parity with the dollar.

The last time this happened was between 1999 and 2002, when it sank all the way to an all-time low of $0.82 in October 2000.

In any case, the euro’s losses add another “headache” to the ECB, as they make imported goods more expensive, thus adding to inflationary pressures.

“It’s good news for economic activity as it supports exporters, but unfortunately it raises inflation a bit,” France’s central banker Villeroy de Gallo said earlier today.

As he added, “the exchange rate is not something we set, but we monitor it because it matters for inflation.”