The euro has dropped to the lowest level against the US dollar in nearly two years as the conflict in Ukraine continues to escalate.
The exchange rate reached roughly US$ 1.1, the lowest level since May 2020, following reports that the Zaporizhzhia Nuclear Power Station was on fire after a Russian attack, Reuters reports.
The euro recovered slightly once Ukrainian officials pointed out there were no signs that radiation levels at the power plant increased, but it remained 2.1% down this week.
The EU currency reached its lowest point in almost four years against the Australian dollar this week, and hit the lowest level against the British pound since July 2016.
Russia continued to attack and surround Ukrainian cities on the ninth day of the invasion, with Ukraine’s main eastern port Mariupol under heavy bombardment.
ING Bank analysts warned that the war “will be devastating for Ukraine” and that “short and longer-term implications will definitely hurt” the Russian economy.
“EU countries will also be among those which will be hit the most by these sanctions,” they noted, pointing out that rising energy prices could jeopardise the economic rebound that had been expected to follow the easing of coronavirus-related restrictions.
According to the analysts, price hikes will likely slow down European Central Bank (ECB)’s normalisation of monetary policy although they maintain that “at the next week’s ECB meeting, any hints of rate hikes are out of the question.”
Orbán echoes the warning
Today, Hungary’s Prime Minister Viktor Orbán warned that EU sanctions against Russia will have negative effects on the EU economy. “Sanctions have a price as it is a double-edged weapon, and we will pay this price in the short term”, he cautioned, indicating that his government would have to do its best to cushion the blow.
“This is only the beginning of the crisis”, Orban said, noting that soaring energy prices are creating additional inflation pressure.
Pointing out that most of the Ukrainians who had fled to Hungary had since moved on to other countries, he said his government wants to offer jobs to those who stayed.
Hungary can offer Ukrainian refugees accommodation and pay their costs for three months, just like it does for other job seekers in the country. Those Ukrainians who opt to stay in Hungary would have to find jobs and integrate into the society.