FOREX-Euro Crashes As Austria Reimposes Lockdown; dollar flying high

* Chart: Global exchange rates https://tmsnrt.rs/2RBWI5E (redesigns, added comments, updated prices)

By Iain Withers

LONDON, Nov. 19 (Reuters) – The euro collapsed to its lowest level in nearly 16 months on Friday after Austria became the first Western European country to re-impose a full lockdown and Germany did not rule out doing the same.

The single currency has been in decline all week, under pressure from rising expectations of a faster interest rate tightening elsewhere, notably in the United States.

The dollar was on track for a fourth straight week of gains against its main rivals, capitalizing on the woes of the euro.

European Central Bank President Christine Lagarde doubled down on her cautious stance on Friday, saying the ECB should not tighten policy as it could undermine the recovery.

Austria has also said it will demand that all of its citizens be vaccinated against COVID-19 by February, while Germany’s health minister has warned that lockdown restrictions could revert to it.

“One thing is certain, if the whole of Europe were to be confined again, and depending on its duration, we will have to rethink our growth scenarios,” said Stéphane Ekolo, global equity strategist at Brokerage Tradition.

The euro has lost more than 1% this week, falling two-thirds of a percent on the day and falling below $ 1.13, close to a low of $ 1.12630 reached on Wednesday.

The euro weakened overall, also hitting an over six-year low against the Swiss franc, last down 0.5%.

The overall dollar index, which tracks the dollar against a basket of six major currencies, is on track for a weekly gain of around 1%.

The dollar was up 0.4% on the day at 95.958, close to the 16-month high of 96.266 reached on Wednesday.

The dollar is increasingly expected to strengthen further next year. This week, US retail sales have beaten expectations after last week’s inflationary surprise.

“We believe that a combination of a Fed cut and slower global growth should favor the US dollar in 2022,” UBS analysts said in an outlook report.

The Japanese yen strengthened following news of Austria’s lockdown as traders sought safe havens, up 0.3% against the dollar at 113.93 yen.

The currency had previously weakened slightly after the Japanese government launched a new 55.7 trillion yen ($ 490 billion) stimulus package.

The British pound lost some of its recent gains and lost 0.5% to around $ 1.34330.

In cryptocurrencies, bitcoin is below $ 60,000 and is expected to experience its worst week in six months – with the latest trading around $ 57,000. ($ 1 = 114,4500 yen)

(Additional reporting by Julien Tom Westbrook in Sydney; Editing by Peter Graff and Emelia Sithole-Matarise)


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