The euro was just off its lowest in almost two decades against the dollar as concerns about the impact of surging energy prices on the euro zone economy continued to weigh.
The Norwegian government on Tuesday intervened to end a strike in the petroleum sector that had cut oil and gas output, ending a stalemate that could have worsened Europe’s energy supply crunch.
Meanwhile, Goldman Sachs raised its natural gas price forecasts by saying that a complete restoration of Nordstream1 flows is no longer the most likely scenario.
“It is not only the threat of non-delivery that is weighing on the euro,” Moritz Paysen, forex and rates adviser at Berenberg, said.
“The already very high energy costs are also a burden. Energy costs in Europe are many times higher than in the U.S.,” he added.
The euro was flat at 1.0266 against the dollar after hitting its lowest since December 2002 at 1.0236 on Tuesday.
The divergence between central banks’ tightening cycles across the Atlantic remained in investors’ focus.
“The big question is whether this deterioration in growth prospects is enough to curtail tightening cycles – especially that of the Fed,” ING analysts said.
They reckon the forex market will consolidate the current levels on Wednesday ahead of Federal Open Market Committee minutes from its June meeting, due at 1800 GMT.
Euro slumps as recession risk stalks eurozone
“The general view that the Fed might ultimately have more opportunity than many other central banks to continue policy normalization,” Unicredit analysts said.
The dollar index – which tracks the greenback against six counterparts – was flat at around 106.5.
An early selloff saw the euro briefly drop to its lowest against the Swiss franc since the Swiss National Bank abandoned its currency cap in 2015.
The single currency was down 0.1% to 0.9933 after hitting a fresh 7-year low at 0.9911.
Yen gained a little support from some safety bids after Japanese households’ inflation expectations strengthened in the three months to June, with the ratio of homes expecting price rises over the coming year hitting the highest level in 14 years.
The dollar dropped 0.3% to 135.43 yen. It hit at the end of June its highest since 1998 at 137.
Bank of Japan has said it would not withdraw monetary stimulus because inflation is due to soaring fuel and raw material costs blamed on the Ukraine crisis and will likely prove temporary.