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© Reuters. The euro maintains 1.07 dollars despite the fact that inflation persists in the US
Frankfurt (Germany), March 14 (.).- The euro maintained the level of 1.07 dollars on Tuesday, despite the fact that underlying inflation persists in the US and justifies further increases in interest rates.
The euro was trading around 4:00 p.m. GMT at $1.0725, compared with $1.0717 in the final hours of European currency market trading the previous day.
The European Central Bank (ECB) set the reference exchange rate for the euro at $1.0737.
Core inflation, which measures the rise in consumer prices minus food and energy prices, the most volatile, fell in the US by one tenth and placed its interannual rate in February at 5.5%, the lowest figure since December 2021.
On a monthly basis, however, the core was up half a point, after posting a 0.4 point increase in January.
US Treasury yields rose as markets expect tensions in the financial sector to be contained and that the Federal Reserve (Fed) will be able to continue its fight against inflation and raise interest rates further.
For this reason, the dollar recovered some positions against the euro after falling on Monday because the Fed’s path was reconsidered after the bankruptcy of Silicon Valley Bank (SVB), which specialized in financing emerging companies.
The chief economist at asset manager abrdn, Paul Diggle, believes that the ECB is likely to go ahead with this week’s planned 50 basis point hike, putting the deposit rate at 3%, because the direct effect of the US banking sector on Europe should be limited.
“European banks have little exposure to US deposits, and the eurozone banking system is well capitalized and has been stress tested,” says Diggle.
But, he adds, the market is clearly concerned, and fear spreading to depositors is currently the real risk factor.
The single currency traded in a trading band between $1.0679 and $1.0745.
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