The euro has been trading below $1.20 for almost two weeks, the lowest level since early March, but it could stay that way for at least another week or two, according to data compiled by the London-based exchange.
The low level comes as global investors have become increasingly nervous about the possibility of a sharp fall in the value of the currency as it struggles to maintain its gains from last year’s peak.
“It’s hard to predict where the euro will fall,” said Scott Pletcher, chief market strategist at CME Group.
“There’s been a lot of talk about a correction.”
The Euro Area is seen as a safe haven for the European economy and the eurozone’s bond market.
(AP Photo/Andrew Harnik) The euro’s fall comes at a time when other currencies have been climbing in value.
U.S. stocks are up about 3% so far this year, while the yen is up about 1%.
The dollar has also gained more than 5% this year.
The euro fell to $1,218.93 against the greenback on Monday.
The dollar index, the index of 52 currencies against the dollar, rose to 102.15.
For perspective, the euro was trading around $1.,237.35 as of 8:30 a.m.
The greenback rose by $1 to $2.0721 per euro, marking its biggest gain in about a year.
“This is a very important year for the euro, a very big year for its value,” said Andrew Zalewski, chief investment officer at Zalu Advisors.
The currency has also rallied by nearly 2% so this year and is now trading below the $1 level for the first time in at least five years.
That means the euro could fall by as much as $1 or more before ending the year, he said.
The central bank will also take further action to curb the price of the euro and other currencies in a bid to bolster confidence in the world’s second-biggest economy.
The Bank of England is set to release its next round of monetary policy decisions next week, and the central bank is expected to signal its intention to raise interest rates at its July meeting.
Investors have become more concerned about the outlook for the currency since a surprise decision by the Bank of Japan in December to buy about $600 billion in bonds to support the economy.
That sparked a selloff in the yen, which has also dropped in value since then.
The yen has gained almost 4% against the euro this year while the greenmarket has gained just over 2%.
This has pushed the euro lower against the U.K. pound, which is up almost 3% this month.
“The dollar is a safe-haven currency for the U.”
“That’s why they have been selling so much of their stocks and bonds.
People are buying and holding in euros and other currency.”
The euro rose 0.7% to $US1.3570 against the yen.
For reference, the U, British pound and Canadian dollar were all above $US10.20.
The yuan rose 0% to 1.907 per dollar.
For context, the yuan was trading above $1 for the second time this year after hitting a record high of $US9.30 on Dec. 9.
“In terms of the bond market, it’s a pretty healthy position,” Zalwuksi said.
A large portion of European countries have already announced bond sales.
“We have been seeing a lot more European bond purchases,” said Pletcher.
“People are buying bond funds in the United Kingdom, for example, which are now trading at around $US2,000 a share.”
For reference: The European Central Bank has raised interest rates twice this year to try to revive growth.
But bond yields have continued to rise and are now over 100 basis points higher than they were just two years ago.
The U.N. Security Council on Monday approved a new draft resolution that would require member states to boost their monetary support for their economies and boost their financial institutions by a further 2% to 3% in the coming months.
It’s not clear whether the resolution will be passed.
“I don’t think it’s going to be very difficult to pass this resolution,” said Peter Kornbluh, chief strategist at the Boston-based investment advisory firm Pimco.
He said a stronger euro could be a good thing for the broader euro area.
“If the euro drops, the economy is going to suffer,” Kornbulh said.