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NEW YORK: The dollar surged to a 20-year high against a basket of currencies and the euro broke below parity against the greenback after data on Wednesday showed US consumer price inflation surged to a 40-1/2-year high in June.

The consumer price index increased 1.3% last month as gasoline and food costs remained elevated, more than the 1.1% expected by economists polled by Reuters.

“This morning’s number is staggeringly high. It’s higher than expected and shows that inflation is going quickly in the wrong direction,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

The euro plunged to $0.9998 against the greenback, breaking below the $1 level for the first time since December 2002, before bouncing back to last trade at $1.0023.

The dollar index reached 108.59, the highest since Oct. 2002, from around 107.9 before the data released.

The single currency is being hurt as the region faces an energy crisis sparked by sanctions imposed on Russia due to its invasion of Ukraine.

“The sanctions that are trying to hurt Russia are also hurting the European Union,” said Lou Brien, a market strategist at DRW Trading in Chicago. “They are in a tough time to begin with coming out of the pandemic, but this additional layer of trouble also makes the euro less attractive.”

Concerns about Europe’s outlook have increased since the biggest single pipeline carrying Russian gas to Germany, the Nord Stream 1 pipeline, began annual maintenance on Monday. Governments, markets and companies are worried the shutdown might be extended because of the Ukraine war.

The Federal Reserve is also expected to hike rates further than peers including the European Central Bank.

The US central bank is expected to raise rates by 75 basis points when it meets on July 26-27, and investors raised bets that a 100 basis points increase could be on the table after Wednesday’s strong inflation print.

The US dollar gained 0.49% against the Japanese yen to 137.54, but held below the 137.73 level reached on Monday, the strongest level in 24 years.

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