Euro hits 20-year low against the dollar

The euro fell to a 20-year low against the dollar on Monday as Europe’s energy crisis intensified.

The single currency dipped below parity with the dollar and was trading at $0.988 after Russia indefinitely suspended gas flows through the Nord Stream 1 pipeline to Germany, sending gas prices surging.

Gazprom said on Friday that the decision not to resume gas supply was due to an oil leak detected at the last compressor unit still in operation at the Portovaya compressor station. It said the repairs could only be carried out "in conditions of a specialised repair shop".

However, the statement from Gazprom quickly followed an announcement from the G7 that it would be implementing a price cap on purchases of Russian oil.

MUFG Bank said: "The Gazprom announcement appears to be more a form of retaliation from Russia as it continues to hit back against sanctions imposed by the West.

"Russia’s ongoing weaponisation of energy supplies continues to increase downside risks for European economies and the euro. It has been estimated that if gas supply from Nord Stream does not resume, it will remove 30mcm/d over the next twelve months. The developments will re-heighten fears over greater demand destruction from higher prices and from the higher risk of rationing over the winter period."

Susannah Streeter, senior markets analyst at Hargreaves Lansdown, said: "Ostensibly the reason for the closure is an oil leak in one of the turbines, but industry experts have called into question the necessity of a move of this magnitude given the repairs required.

"Instead it seems energy is Russia’s big weapon in the ongoing war with Ukraine. Turning off the gas taps appears to be a response by Russia to a planned price cap on its oil, designed to cause blackouts and rationing and further financial pain for companies and consumers across Europe. The price of natural gas futures, traded in Europe surged by 30% earlier before dipping back a little. This huge jump will add fuel to the fire of inflation and intensify the clamour for emergency government help."