UPDATED: Ukraine war sends euro below $1.10 for first time in two years

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LONDON, March 4 (Reuters) – The euro fell on Friday below $1.10 for the first time in almost two years and hit a fresh seven-year low versus the Swiss franc as the war in Ukraine lowered expectations of European economic growth.

The European single currency was down 0.8% to $1.0967, its weakest level since May 2020, after Russian forces seized the largest nuclear power plant in Europe after a building at the complex was set ablaze. 

Versus the Swiss franc, another safe haven, the euro fell 0.8% to 1.0066, its lowest since January 2015 . The euro sank 0.4% against sterling to 82.56 pence, hitting its lowest level since July 2016.

Analyst said the war and the effects of surging energy and gas prices will likely undermine European consumption and economic growth prospects.

“Euro remains somewhat at the epicentre of risk aversion,” said Neil Jones, head of FX sales at Mizuho.

Given surging energy prices and the European Central Bank reluctance to change its rate policy “euro trend should continue lower,” he said.

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

Amid rising pressure on central European currencies, the Czech National Bank said on Friday it was intervening in the market to stem the depreciation of the crown CZK=, at almost 20-month low against the U.S. dollar.

Poland’s central bank intervened this week but the zloty still hit a 13-year low against the euro, while Hungary delivered its most aggressive rate hike since 2008 as the forint also tumbled to record lows. 

The rouble ,  slipped back towards record lows against the dollar and euro in volatile Moscow trade.

The U.S. dollar index =USD rose 0.6% to 98.335, after touching its highest level since May 2020 against a basket of peers.

Elsewhere, the Australian dollar AUD=D3 continued its advance, helped by the commodities boom, and rose to a four-month high of $0.7375 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 115.38 per dollar. 

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