Investing.com -- The euro slipped below 1.07 against the U.S. Dollar on Tuesday reaching an 11-year low, as uncertainty of the euro zone's bond buying program combined with expectations of an imminent interest rate hike by the U.S. Federal Reserve pushed investments overseas.
EUR/USD lost 0.13% or 0.014 in late afternoon trading to 1.0682 on Tuesday. The pair continued to weaken, as the U.S. Dollar Index reached a 12-year high at 98.62. The index measures the greenback versus a basket of six other major currencies.
For importers in the euro zone, there are mounting fears that the currency will drop even lower. On Tuesday, Deutsche Bank (XETRA:DBKGn), the largest bank in Germany revised its forecast for euro-dollar parity. Deutsche Bank forecast that EUR/USD will reach parity at the end of this year; previously the bank predicted it would occur at the end of 2016. On a long term basis, Deutsche Bank predicts that EUR/USD will reach 85 cents by 2017?down from previous forecasts of 95 cents at that point.
The developments on Tuesday came hours after Federal Reserve Bank of Dallas president Richard Fisher's comments in a speech before Rice University's Baker Institute for Public Policy. In his remarks, Fisher warned of a recessionary risk that could ensue if plans to raise interest rates are delayed even further.
"Every time the Fed has tightened policy after achieving full employment it has driven the economy into recession," Fisher said. "It's because of this dynamic and my desire to prolong current expansion that I have argued that we should begin reducing policy accommodation earlier than many of my colleagues on the Federal Open Market Committee appear to prefer."
Currency traders await further talks between Greece and its euro zone creditors, which are set to resume on Wednesday in Brussels. Negotiations hit a snag between the sides on Monday when the group of the euro zone finance ministers emphatically rejected Greece's proposed reform measures that are seen as a prerequisite to extend its bailout package.