Forex traders are preparing for a world where one euro is worth less than one dollar. Zhitong Finance APP learned that for the first time since 2002, the exchange rate of the euro against the U.S. dollar hovered on the edge of parity. It is reported that after falling to 1.0162 o

Forex trader is preparing for a world where one euro is worth less than one dollar.

Zhitong Finance APP learned that for the first time since 2002, the euro-dollar exchange rate hovered on the edge of parity. It is reported that after falling to 1.0162 on Wednesday, the euro-dollar exchange rate fell to $1.0186 on Thursday. With the euro falling to 20-year lows against the dollar, market focus is turning to how low it could go.

Bearish euro options bets are concentrated above parity and at the 0.95 level, according to data from the American Depositary Clearing Corporation.

ING International Group strategists headed by Chris Turner said that 1.00 may be the most important psychological level in the foreign exchange market. If it falls below 1.00, volatility is expected to rise sharply, and the euro-dollar exchange rate is likely to fall further.

Another important psychological level is 1 euro to 0.9850 US dollars, and the latest round of options betting suggests that this level may be a short-term bottom.

The euro may depreciate further

Considering that the euro-dollar exchange rate was around 1.15 in February this year, the euro's downward spiral is alarming. The outbreak of the Russia-Ukraine conflict has worsened the economic growth prospects of the euro zone and pushed up its energy import costs, while the Federal Reserve's increasingly aggressive interest rate hikes have also pushed up the dollar.

This puts the European Central Bank in a difficult position. The European Central Bank has so far avoided aggressive tightening, signaling a 25 basis point rate hike later this month. This may lead to a widening of interest rate spreads , which will continue to put pressure on the euro.

Some market participants warned that the euro may further depreciate.

George Saravelos, head of currency research at Deutsche Bank, said the euro-dollar exchange rate could fall to 0.95-0.97, comparable to the extreme levels seen in foreign exchange markets since the end of the Bretton Woods system in 1971.

Nomura International strategists warned that the euro-dollar exchange rate may fall to 0.95.

According to Bloomberg's option pricing model , there is a 52% chance that the euro-dollar exchange rate will hit parity within the next 30 days, and a one-in-four chance of hitting 0.95 before the end of the year. This makes the euro the most expensive currency to hedge against further declines since the Russia-Ukraine conflict began.