The euro fell closer to parity with the dollar yesterday, as the US currency’s strength heightened the policy conundrum facing the US Federal Reserve as it prepares for its first interest-rate rise in nearly a decade.
The euro dipped under $1.06 as Mario Draghi, the European Central Bank president, credited the cheap single currency with helping the reversal in the eurozone’s slowdown and said euro area developments are “pointing in the right direction”.
The moves come as the Fed prepares for a key policy meeting next week at which it is expected to lay the groundwork for a rate rise as soon as June by dropping a pledge to be “patient”. The dollar is rising in part because of the prospect of higher interest rates and stronger growth. That is squeezing earnings of exporters and US companies with large global operations, and could damp inflation as import prices fall.