The euro briefly dipped below parity against the strong dollar on Monday and was trading at five-week lows, driven down by fears that a three-day stoppage in European gas supply later this month may deepen an energy crisis.

After Russia announced late Friday a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month, the euro bore the brunt of the selling pressure versus the dollar. The currency fell to as low as $0.99945, its lowest level since mid-July, and was last down 0.4% on the day.

"The euro's fair value has been damaged by the energy shock - meaning that euro/dollar is not especially cheap even at these levels," said Chris Turner, global head of markets at ING.

Bundesbank President Joachim Nagel explained that the German economy, which is among the most vulnerable to disruptions in Russian gas supply, is "likely" to enter a recession this winter if the energy situation worsens.

Read next: Euro falls to under $1 for first time since 2002

In numbers

The US dollar index, which measures the currency against six rivals including the euro, rose to 108.47 -- its highest since July 15.

It rose 2.33% last week, its largest weekly rise since April 2020, amid a chorus of Fed policymakers emphasizing the importance of doing more to rein in decades-high inflation.

Richmond Fed President Thomas Barkin stated on Friday that there is an "urge" among central bankers for faster, front-loaded rate rises. Money markets currently indicate 46.5% odds for another supersized 75 basis point rate hike at the Fed's next meeting on Sept. 21

Read next: Bank of England announces biggest interest rate hike since 1995

Economists in a Reuters poll lean toward a 50 basis-point increase with recession risks on the rise. Benchmark 10-year US Treasury yields briefly rose above 3% on Monday for the first time since July 21.

As yields came off their highs, the dollar edged down against the yen and was a touch lower on the day at 136.81.

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