The euro hit a 20-year low on Friday, licking its wounds at the end of its worst week in two months as investors braced for Europe to enter a recession while markets waited for U.S. employment data to set the next direction for the dollar.
The euro fell more than 2% this week on fears that gas shortages are looming in Europe and economic growth will suffer. It hit a two-decade low of $1.0144 overnight and is barely clinging to parity, buying $1,0185 for the last time.
The fall of the euro led to the fact that the US dollar index this week reached a two-decade high of 107.270, and in Asia the index was last slightly below this level and fell by 0.1% - 106.840.
"Europe is exposed to great risks related to energy dependence, the crisis of the cost of living for consumers and the risk of fragmentation. This means a depreciation of the euro / dollar, "Citi analysts say.
The Australian dollar rose 0.3% on Friday to $0.6850, down from a two-year low of $0.6762, thanks to an infrastructure stimulus program announced in China that traders hope will boost demand for the commodity.
Sterling also seems to have weathered a week of British political chaos relatively well. It was down 0.3% for the week but rebounded slightly overnight when Prime Minister Boris Johnson resigned, putting an end to uncertainty about his future.
The pound last traded for $1.2053 and was on track for its best week in more than two years thanks to a weakening euro.
The New Zealand dollar rose 0.3% to $0.6192 and looks set for a stable week. Growing concerns about the outlook for the global economy stabilized the fall of the Japanese yen as investors seek safety and it held at 135.94 per dollar.
While skyrocketing energy prices appear to be unsettling confidence and growth in Europe, investors are also concerned about the health of the U.S. economy, even as the latest data has been better than expected.
The next indicator will be data on employment in the non-agricultural sector of the US, which should be released at 12:30 GMT. Economists predict that about 268,000 jobs were created in June.
Higher rates could ease some fears of a recession, but are likely to raise rates for rate hikes and could lead to a rise in the dollar.
"More significant job growth will underpin expectations of an even more aggressive Fed policy," said Carol Cong, a strategist at Commonwealth Bank of Australia in Sydney.
Deutsche Bank strategist Alan Ruskin also said simply living up to expectations would be enough to encourage talk of "U.S. exceptionalism" in the face of a global energy shock.
This could keep the dollar high, "with euro/dollar parity being the most obvious target for a few days/weeks," he said. The dollar has also held out in emerging markets, causing several Asian currencies to fall to multi-year lows this week, with the Indian rupee hitting an all-time low.
Bitcoin, meanwhile, began to recover, rising in price over the week by almost 15% to $ 22,100.
