The euro has fallen to its weakest level in more than two-and-a-half years, as investors baulked at poor eurozone economic data and moved into the dollar as a haven asset while the coronavirus crisis deepens.
The Europe-wide currency dropped by 0.2 per cent on Thursday, extending losses from the previous day, to reach a low of $1.0843, its weakest value since May 2017.
Worries over the spread of coronavirus have boosted the dollar, a haven for investors during uncertainty over the global outlook. The dollar index, which measures the greenback against a group of other currencies, was up 0.2 per cent in the same period — bringing its gains over the past month to 1.8 per cent.
“The defining characteristic of the [dollar] in recent weeks has been its role as a safe haven,” said Steve Englander, a currencies analyst at Standard Chartered. The dollar has been the strongest performing G10 currency so far in 2020.
The euro’s losses deepened in afternoon trading on Thursday after the Centres for Disease Control confirmed the 15th case of coronavirus in the US, and news outlets reported that the White House believes cases of infection have been “severely” under-reported in China.
The euro is also down against the pound, to £0.837, its lowest level since July 2016, and is at its weakest value against the Swiss franc since March 2017, at SFr1.063, again reflecting haven flows into the franc.
“What’s interesting is that the market consensus has been forecasting a recovery for the euro since early 2018 and it has consistently been wrong,” said Jane Foley, head of the currency strategy at Rabobank. “This is not just about the coronavirus, this is a euro story,” she added, noting that investors have been spooked by weakness in eurozone data, particularly coming out of Germany, as well as a turbulent political backdrop.
Figures released on Wednesday showed that industrial production had deteriorated faster than expected in the euro area.
Ms Foley described the Swiss franc and euro as “neighbours from hell” because the franc generally appreciates when the euro falls, complicating efforts by the Swiss National Bank to prevent its currency from climbing too far.
“The narrative for the moment remains squarely focused on dollar positives — how the dollar benefits as a flight-to-quality trade when the coronavirus drives risk negative and then also benefits as a G10 carry currency when risk improves,” said Alan Ruskin, an analyst at Deutsche Bank in New York.
“The latest low is not to be chased too aggressively, but equally the choppy but well-defined [euro] downtrend is not likely to reverse any time soon,” he added.
One possible source of support for the euro could come from politics; in recent months, US President Donald Trump has occasionally helped to lift the euro by complaining that it disadvantages the US by being too weak.