The euro rose for the first time in two weeks on Thursday, trading at around $ 1.0585, and bouncing off the previous day’s 12-year lows. It has fallen fast and furious in recent weeks against a backdrop of monetary stimulus in the euro zone and expectations of monetary tightening from the Fed this year.
Fast and furious
The euro has shed 6.5 percent against the dollar in the past 30 days and even with Thursday’s rebound, the currency is down more than 4 percent over the past week.
It’s that fall that has raised expectations for a move to parity against the dollar, something that last happened in 2002.
Read MoreDollar-euro parity: What a one-to-one exchange means
And what role does the Fed play in this parity debate? Well, say analysts, if Yellen removes the key phrase “patient” from the Fed’s statement, this would be interpreted by markets as signal that a June rate hike is on the cards.
A rate rise would increase the yield differential between the dollar and the euro – pulling the single currency lower. On the other hand, if the Fed continues to express patience about the economic outlook, the dollar could give up some of its recent gains.
“If they [Fed policymakers] remove the word patience from their statement, it’s [euro/dollar] going to go to parity very quickly,” Kelvin Tay, managing director and regional chief investment officer, Southern APAC at UBS Wealth Management said on CNBC Asia’s”Street Signs.” “If you look at the momentum the U.S. dollar has going for it at the right now, it’s quite scary.”