Euro Sinks to Multi-Year Lows Versus Dollar, Swiss Franc and Sterling

By Joice Alves

LONDON (Reuters) – The euro fell to a seven-year low versus the Swiss franc and hit its lowest point in almost two years versus the dollar on Friday as the war in Ukraine lowered expectations of European economic growth.

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)