Euro falls below dollar parity for first time since 2002

The latest slide came after another hot set of U.S. inflation data.

The euro dropped below parity against the dollar on Wednesday for the first time in almost two decades, as a hawkish U.S. Federal Reserve and growing concern about rising recession risks in the euro area continued to batter the currency.

The latest slide came after another hot set of U.S. inflation data.

Europe's single currency started this year on a strong note given a post-pandemic economic recovery. But Russia's invasion of Ukraine, surging European gas prices and fears that Moscow could cut off supplies further has raised the spectre of recession and hurt the euro.

Heightened global uncertainty and an aggressive Fed monetary policy stance meanwhile have benefited the safe-haven dollar.

The euro tanked as much as 0.4% to a low of $0.9998 at 1245 GMT, its lowest level since December 2002. It was last down 0.1% on the day at $1.005 and has lost more than 10% so far this year.

"Gas rationing, stagflation, an expected recession, they are all good reasons to be bearish on the euro," said Stuart Cole, head macro economist at Equiti Capital in London before the euro crossed that threshold.

He add that these factors will make it harder for the European Central Bank to hike interest rates, further widening the interest-rate differential with the United States.