The euro was hovering below the dollar this morning after hitting a fresh two-decade low yesterday.

It has been a volatile year in foreign exchange markets. The recent moves lower in the euro dollar currency pair have been more about dollar strength than euro weakness, according to Ronan Costello, Head of FX Strategy at Bank of Ireland.

"If you look at how the euro has performed against other international currencies like the pound or the Japanese Yen, it has held its value fairly well," he said. "Against the dollar it has depreciated by 12% over the past 6 months."

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The dollar has been outperforming the euro and most currencies this year because the economic outlook is comparatively brighter for the US than for Europe, and also because US investment yields and deposit rates have risen much higher than they have in Europe.

Mr Costello said the dollar is seen as a safe haven currency so in times of conflict or during volatile market episodes where stock markets are retracing lower these safe haven currencies like the US dollar or the Swiss Franc tend to perform well.

He said it is always very difficult to time any currency hedging. "We may not have reached the end of this trend lower in euro dollar just yet," Mr Costello said, "but if you take a step back and look at the magnitude of the move and over the last 12 months the dollar has appreciated by 20% against the euro, moves like that in major currency pairs don't happen very often especially over such a short timeframe, so I do think that probably the wise thing to do if you are a company that has benefitted from this move is to lock in or hedge some of those profits."