The euro briefly fell back below parity against a robust dollar on Monday and was languishing at five-week lows, weighed down by concern that a three-day halt to European gas supplies later this month will exacerbate an energy crisis.
The dollar index, which measures the greenback against a basket of peers, hit new five-week highs as US Federal Reserve officials reiterated an aggressive monetary tightening stance.
It was the euro that bore the brunt of the selling pressure against the dollar after Russia announced late on Friday a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month.
The currency fell to as low as $0.99945, its lowest level since mid-July, and was last down 0.4 per cent on the day.
"The euro's fair value has been damaged by the energy shock – meaning that euro/dollar is not especially cheap even at these levels," said Chris Turner, global head of markets at ING.
Bundesbank president Joachim Nagel told German newspaper Rheinischen Post that the German economy, among the most exposed to disruptions in Russian gas supply, is "likely" to suffer a recession over the winter if the energy crisis continues to deepen.
The US dollar index, which measures the currency against six rivals including the euro, rose to 108.47 -- its highest since July 15th.
