The euro weakened against the dollar today amid another sharp increase in oil and natural gas prices and while investors waited for US President Joe Biden to unveil new sanctions against Russia during his trip to Europe.
Biden is heading to Brussels for talks with NATO and European leaders.
He will push Europe to reduce its reliance on Russian oil and gas, and could announce new sanctions on members of the Russian parliament over Moscow's invasion of Ukraine.
The European Union currently seems unlikely to agree to a ban on Russian oil which would also weigh on the euro.
"An embargo on Russian oil would increase the likelihood of Russia turning off the gas tap to Europe in return," Ulrich Leuchtmann, head of FX research at Commerzbank, wrote.
He said such a scenario could throw Europe into recession.
Derek Halpenny, MUFG's head of research, noted that the disruption of Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC) was adding to worries about energy markets.
"The primary contagion from a macro picture comes from energy prices and they are moving in a direction which is not positive", he commented.
He added that the pressure on the common currency from the US Federal Reserve's aggressive stance on inflation was also resuming after a brief respite.
Federal Reserve Chair Jerome Powell has opened the door for raising interest rates by more than 25 basis points at upcoming policy meetings.
The euro opened broadly flat but gradually lost ground against the greenback and fell about 0.4% below the $1.10 bar, while the continent's equity markets also drifted into negative territory.
Sterling eased 0.44% at $1.3204 after touching its highest against the dollar in nearly three weeks.
British inflation shot up faster than expected last month to a new 30-year high, worsening a historic squeeze on household finances that finance minister Rishi Sunak is under pressure to ease in a budget update later on Wednesday.
Britain has the second-highest annual inflation rate among Group of Seven countries, behind only the US, as global commodity and energy prices soar, exacerbated by Russia's invasion of Ukraine.
High commodity prices have been a clear negative for the yen, as Japan imports the bulk of its energy, widening the country's trade deficit.
The currency slipped to a new six-year low of 121.415 per dollar overnight but later recouped its losses and ticked up 0.05% at 120.750 per dollar.
The contrast between the Fed's perceived hawkish stance and Japan's dovish policy is expected to weigh further on the yen.
Bank of Japan Governor Haruhiko Kuroda said this week it was premature to debate an exit from ultra-loose policy, including how to whittle down its massive holdings of exchange-traded funds.
Against the Japanese currency, the Australian dollar rose to its highest level since December 2015.
In cryptocurrency markets, bitcoin and ether were slightly lower at $41,893 and $2,941 respectively.